Fair Market ValueWell this is not a surprising outcome to the Macro saga but I can't say I am overly pleased.
It will be interesting to see what the Special Committee can really do in this instance and how hard they are really going to work at finding a superior offer. This would have been Wayne Albo's realm but I am not sure that it is Bob Fedderly's given his background (I would be happy to be wrong).
A superior offer would require that the Management team be involved for many years to come. Could Aecon or another group really keep Frank and the gang excited to show up for work every day? At what price would it take for them to see more upside in selling to an external group Vs continuing to build the company themselves and selling down the road at 2x the offer they are offering retail investors?
I suspect this deal goes through; however, it falls at the "Low" end of Fair on the Fairness Opinion spectrum. Why do I think this?
Book Value
Macro's Management has previously disclosed that the fair market value for the construction equipment was worth about $1 per share more than the accounting Book Value. Macro also owns the land and buildings of its premises which I suspect are also worth more than the stated Book Value but I don't know by how much. At the end of 2021 I expected the Book Value to be in the $4 range which puts the adjusted Book Value at least $5 per share plus.
Earnings
If we look at this another way, Macro has a decent runway given the uptick in Oil & Gas activity. I think that the Company could earn at least $0.50 per year for the next several years and possibly more. At $0.50 that represents an implied Price to Earnings multiple of 5.0x the proposed offer by the time you take out the excess cash of $1.5 per share. Where things get really crazy is that if you expect Macro to earn $0.75 for the next several years and you deduct the excess cash, the implied Price to Earnings Multiple of 2.0X!
I get that this industry is cyclical; however, my view is that this is being taken out at a price that is at least $0.50 to $1.00 lower than what my view of Fair Market Value would be.
Let's see what happens!
LR