Fair Value > $1 share minimum.Gear is a essentially debt free profitable heavy and light oil producer with the
ability to pay a very generous dividend for up to 10 years in thier current state
(thanks to the $600m in tax pools). Thier only real weakness is investors are
pretty well all retail- i.e disorganized and weaker than thier institutional counterparts.
The finance people and Cenovus know this and Gear's BOD are willing to sell GXE
shareholders down the river with this self -serving deal. Cenovus gets the heavy oil
assets cheap and most of the tax pools, GXE brass get to kept thier jobs with a new
smaller producer - with all the perks thats entails, and the financial advisors get a very generous transaction fees and who knows what else.
A complete takeover of GXE at the book vule of >$1/share will cost Cenovus
(or seomone else) about $265M. For that price would get a debt free company
earning about $17M tax free Funds from operations per quarter. In 3.5 years
they would earn back the $265M they paid for it. At that point they would still
have close to $400M of of GXE predecessor tax pools left over to apply to shield
thier other Cenovus income - worth abouh ($100M at a 25% corporate tax rate).
To me it still looks a steal for Cenvos at $1 takeout of the whole GXE.
All that is needed is for 34% of the shareholders to day no to the deal.
GXE will still have the ability to develope the light oil assets if this stinking
deal is rejected.