Incitec Pivot Ltd T.IPL

RE:RE:RE:Merger

[splurge]

Here is a possible scenario.    PPL had 514 mln s/os and could issue 159 mln new ones on a .38 share swap PPL for every IPL.  Total shares o/s would be about 674 mln. Cashflow combined ppl $2.5 bln plus IPL $0.870 bln would total $3.37 bln and maybe another $300 mln cashflpw or so (guestimate from EBITDA of $450mln) from Heartland in 2 years. Total $3.7 bln cashflow entity with no assumed growth from PPL.  Ipl will pay $726 mln in dividends in 2020 but  could cut by 50% IMO eliminating drip of $359 mln  if nothing happens and storage not sold. Cashflow per share 2019 for PPL about $4.95 actual. ($4.86 using my rough calc above) Could increase to $5.45 per share assuming no synergies in 2022 and no growth from underlying business. Payout PPL 51% goes down to 46% assuming no divy increase . IPL was using DRIP of $359 to fund cap x for remainder of Heartland so assuming cost estimates same then PPL would only spend $359 mln for equity component and finance balance with debt maybe. Not large portion of PPL cashflow. PPL would get oily exposure to oil sand pipeline business and conventional which may not be beneficial but would get Heartland cheap and certainly somewhat de-risked compare their ex project.. They may even have customers for some of Heartland since they cancelled their project. IPL sharesholders face risk of prolonged oil downturn which PPL could weather. IPL shareholders could recieve $402.9 mln in new dividends to replace $363.5 mln old IPL divy assuming IPL divy cut 50%.Credit rating is better on PPL than IPL I think. More upside for IPL sharesholders via growth in PPL core assets. Goldman expects current low natural gas prices this year to lead to whipsaw and much higher prices next year. Gas rigs have declined all through 2019 and are expected to decline further. N.A. gas production will decline especially if assciated gas also diminshes from lower oil drilling also. I assumed no premium but PPL shares were trading much higher a few days ago and they are certainly undervalued like IPL's IMO. IPL has less flexibility and needs to finance Heartland and banks are tougher to deal with right now. I would not offer a premium but could offer a dividend increase if IPL shareholders agreed. Ipl has not sold storage and would not close until June even if sold as I recall. Ipl's natural gas fracking business is under pressure as Mont Belvieu propane prices have declined from over $0.50 per gallon in December to around $0.30 now. PPL has locked in 50% of some of this type of spread at attractive prices for 2020. Not sure what IPL has done exactly although their cashflow from this was done in recent qtr. I love IPL as a company and think management has been superb over the years but times have changed. I doubt any others parties would be suitable as PPL. Not without risk for PPL but makes them stronger with Heartland and lower payout given the accretive nature. I think PPL shares would go up and benifit IPL holders also under this scenario. 
Whatever happens I hope IPL and PPL shareholders fare well during these difficult times.
splurge