Thanks for sharing. I found the commentary on SCR/MEG interesting. Have you attempted to value the pro forma company to figure out what the consideration is actually worth?
Really comes down to what you think the multiple on a rerated company is and that iwill depend on debt level. We’ve done the work, but no sense in discussing it publicly because It’s not a fruitful exercise until you get further along the M&A process. Other buyers like CVE haven’t formally emerged and SCR’s real offer haven’t been released. Once you get a real price discovery then we’ll come back around and talk about what we think it’s worth (since we’ll know what they’ll likely end up paying).
Whatever debt the company ends up with, there will be significant FCF to pay it down pretty quickly so looking 12 months out post close of deal to figure out what the consideration really is makes more sense than the day one premium which is meaningless.
Further, if you think MEG transacts and it’s not with SCR have you considered what those flows out of MEG might mean to a rerate in SCR shares. It’s got similar scale, commodity exposure and better growth than standalone MEG and it’s not in any benchmark yet so has had no price discovery on its own. The $10 special dividend should help lead to a significant rerating especially as it’s $2.1b of flows to a shareholder base that will only have 1.1b float to invest in all else being equal.
It seems short sighted not to look at the whole board but I guess that’s what makes a market.
Thanks for sharing. I found the commentary on SCR/MEG interesting. Have you attempted to value the pro forma company to figure out what the consideration is actually worth?
Really comes down to what you think the multiple on a rerated company is and that iwill depend on debt level. We’ve done the work, but no sense in discussing it publicly because It’s not a fruitful exercise until you get further along the M&A process. Other buyers like CVE haven’t formally emerged and SCR’s real offer haven’t been released. Once you get a real price discovery then we’ll come back around and talk about what we think it’s worth (since we’ll know what they’ll likely end up paying).
Thanks for the reply.
Whatever debt the company ends up with, there will be significant FCF to pay it down pretty quickly so looking 12 months out post close of deal to figure out what the consideration really is makes more sense than the day one premium which is meaningless.
Further, if you think MEG transacts and it’s not with SCR have you considered what those flows out of MEG might mean to a rerate in SCR shares. It’s got similar scale, commodity exposure and better growth than standalone MEG and it’s not in any benchmark yet so has had no price discovery on its own. The $10 special dividend should help lead to a significant rerating especially as it’s $2.1b of flows to a shareholder base that will only have 1.1b float to invest in all else being equal.
It seems short sighted not to look at the whole board but I guess that’s what makes a market.