RE:RE:RE:RE:My take on the latest Crux interviewCorrect Sooner, we honestly have no idea how the variables to the final agreed upon NPV will be meted out. We are not privy to the negotiations. Paul of course has knowledge of the BOD and works in concert with them, but I don't think he will be a primary negotiator, and thakfully so as I am afraid he may lean a bit too conservatively on the value of Casino.
I think you, I, Paul and the BOD would likely all be in agreement that once the final NPV is agreed upon that 50% of that should be the buyout value target. So, the base case is about $8+ if we end up using $2.3 billion as the agreed upon NPV. Your expected result = my worst case scenario result. Using the concept of a Venn diagram (sorry to take everybody back to math class), our expected outcomes match on the extremes of our range of possibilities.
Of course, all that needs to happen over the next 12 months to get that $8+ a share is for the metals to drift downward about 20%. When all we are reading about is inflation, inflation, inflation, do you think this will happen? It could, but it is lower on the probability scale if you ask me. I would give it only about a 20% chance our buyout is at the $8 low point on the scale. Just my humble opinion, but I believe it is at least a semi-educated guess.
Another angle we haven't been discusing much is the fact that in the scenario of a share swap, RIO isn't paying $1 or $2 billion, rather they are paying in shares. This is why I believe the implied (as opposed to actual cash) value will rule the day. In this case, RIO could easily hit the targets some of us are hoping for.