Strategic ReviewEF has just announced that it is beginning a strategic review process, which I interpret as Earthfirst Canada being up for sale. I am assuming that the current turmoil in the capital markets has made raising money for Dokie 1 very difficult and expensive. As a result, I believe they are looking for a white knight who can access capital markets at a reasonble rate to come in and buy the EF assets.
So, what are these assets worth. On paper, according to the latest financial statements, I believe the net assets are worth close to $2 per share. Under the circumstances these assets will likely sell at a steep discount. How much is this discount. I am only guessing here, but I would think that the discount will be at least 50% and perhaps a bit more.
I think the outcome of this strategic review will be a sale to a larger power generation company who is in the windpower business or wants to be. There may be a cash, or cash plus shares, offer . I think this offer will be in the range of 70 to 90 cents per share. I say this because I think the assets are definitely worth more than this, but will be sold at firesale prices. I also think that existing shareholders, many of whom have bought their shares for more than $2 will not sell for anything near the current share price of 25 cents. They realize they will take a beating, but will not accept a complete bloodbath.
So, I think EF will be sold for around $70M to $90M. Who are likely purchasers? In terms of publicly traded companies, I am thinking possibly Northland Power, Epcor, Transalta, or maybe Boralex. There also could be any number of privately owned power companies that may be interested as well.
What do others think?