Alpha Minerals Inc ESOFD

RE:RE:takeover

[letsgetready]

I calculate the ratio of fully diluted shares of FCU to AMW to be 5.37 so 5.30 is pretty close.

FCU's has 168.6 million FD shares outstanding; AMW has 31.4 million FD shares outstanding. Its the fully diluted number that counts as all options and warrants are in the money for both companies and will hence be exercised not shares.

The valuation of all other assets, including cash, is not materially different for both compnanies. The asset of value that each compny holds is its 50% owndehip of PLS.

The merger is intended to consolidate the ownership of PLS into one company, namely, FCU. It is thought this will make Merged Co (FCU) a more attractive target, with an higher valuation than the sum of the parts. THIS IS  WHAT SHOULD BE DEBATED NOT THE MERGER RATIO. ALSO UP FOR DEBATE IS MANAGEMENT OF THE MERGED CO.

We all agree that shareholders of Merged co. should still own 50% of PLS by owning 50% of the shares of Merged Co. What this proposal has done is remove the discount that AMW was trading at to FCU's market valuation and we should be grateful for that.

To give one company's shareholders a bigger share of PLS at the expense of the other company's shareholders is not right, so thats why FCU can't increase its offer for AMW much above the 5.3 share ratio already propseed. Some people who expect a 40% premium don't understand the nature of this transaction. The shareholders of AMW, myself included, will become 50% shareholders of Merged Co (FCU), which will be a cleaner ownership structure and more attractive and valuable.

So AMW shareholders must get 168.6 fully diluted shares in merged co and they will be 50% owners of it and PLS and Merged FCU will have 337.2 fully diluted shareholders outstanding at that time. 50:50 is fair.

What would happen if the sahre ratio was 7? Merged FCU would have to issue 31.4 x 7 fully dilued shares to AMW sahreholders. that would be 219.8 million sahres and Merged Co would then have 388.4 million (219.8+168.4) fully dilued sahres outstanding. The AMW shareholders would then own 56.5% of PLS (219.8/388.4), while the old FCU sahreholders would now own 43.5% of PLS. Clearly not fair.

So if the premium is much above 5.37, the shareholders of AMW will end up with a greater than 50% ownership of Merged FCU and with it a greater than 50% ownership of PLS. The old shareholders of FCU would suffer, with a less than 50% share of PLS. The opposite is true if the ratio is much less than 5.37. So a fair ratio is around 5.3 to 5.4 per share. Thos debating for a much larger premium are arguing against a merged company which in the long run is what's is needed. Both managements realize this and discussion have already been ongoing in this regard.