RE:RE:Meesha - It is a sale of the utilities br. for the US marketMeesha1 wrote: Again, I think the stock is cheap. Its just that this transaction reeks of desperation. The conversion price is 9.0x - 9.3x based on a trailing 12 month EBITDA. As years pass and EBITDA grows, the conversion price becomes a much lower multiple. Ultimately, Aecon will buy back the preferred under one of the following conditions:
Aecon has the option to purchase the Preferred Equity for cash at any time at a value equivalent to the greatest of: (a) the as-converted value of the Preferred Equity, (b) the accreted value of the Preferred Equity, and (c) 1.5x the Net Investment Amount less all cash dividends and distributions paid to Oaktree.
The worst case for Oaktree is they get back their principal plus accrued interest. The other options are a bigger win for them. This is a really round about and expensive way to raise $150MM.
In the end I feel like Oaktree is getting a 12% to 14% coupon AND a 7yr option to buy 27% of Aecon Utilities at a forward multiple that is very low (assuming revenue continues to grow). And Aecon can terminate that option buy paying them back more than their principal. Why such a sweet deal? For their contacts and experience? Wow, thats quite the roladex!
I'm just confused. I fully admit I could be completely wrong. We shall see.
Aka Fairfax, Aecon is selling fo 150m: 27.5% of a subsidiary with a TTM revenue and EBITDA of 931m and 80.3m, corresponding to an EBITDA of 0.275*80.3m = 22m. Close to 7X TTM EBITDA. The market is presently offering 2x since TTM EBITDA excl. LSTKs is 375m. Assume concessions pay the net debt, more so with this sale. What is not to like. We are buying at 2x.