Chalice Brands Ltd CHALF

buy out analysis/question

[Orwellian1984]

The buy out has been mentioned before several times but all rumors and guesses which most probabely has little bone in it.  Yet it is interesting to discuss it.

Let assume an investor is looking to buy an enterprise. What are the parameters to consider financially.

Probabely debts are not the main factor because as the debt increase the price hence the Market Cap will reduce and as a net effect the EV even may reduce which makes it a better acquisition candidate. This is the situation with GLH. Debts are high but the EV is punished even further.

Another factor is the relatively high general&administration expenses of GLH (57% of the revenue). Currently this makes the margin less favorable for us but this line could be improved significantly when GLH become part of a bigger holding. 

Currently the best players of the sector with positive earnings have EV/EBIT in the range of 20-25. With the current EV of the GLH (~$30M) this means an EBIT of ~$1-1.5M makes GLH a fascinating acquisition. This almost mean 30% reduction in general& administration expenses assumeng the cost of good will not change (which in fact it will reduce too).

Beside the recent growth in revenue and positive developements it seems to me GLH as it is and at its current stock price (and EV) is an attractive target for acquisition.

Any way I have no experience in this and it was just a brain storming. Please share your thoughts/knowledge.