National Bank pegs merger value at $1.60Newalta (NAL; SP; $1.45T) is getting recapitalized and it looks far better than it could have been in a debt restructuring outcome. Tervita is essentially RTO-ing through NAL, with the pro-forma entity being run by Tervita management, the board 80% Tervita, and the ownership 89% Tervita / 11% NAL. This is a first take, analyst Greg Colman should be out with a report. More to follow.
- Using Secure-like growth rates and multiples (which may be a stretch, but it’s a starting point), this suggests a pro-forma market cap of something like $1.3 bln, and so NAL’s 11% stake is worth about $143mm or $1.63/sh (currently $0.95/sh). Second, the balance sheet looks a lot better - the pro-forma entity will be more like 3.0x (vs. NAL at ~5x) using management’s numbers and a Secure-like growth rate, and with actual free cash flow, probably around $100mm;
- This may look a little daunting to be diluted down to only 11% of the pro-forma entity, but when you’re coming off a highly levered base, with a market cap of $84mm, this is actually a bit of a win for NAL shareholders. Versus other recapitalizations we’ve seen in the basin which involve highly dilutive financings (and no growth).