RE: To the freaking moooooooooooon!
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Maxim Power Corp. ("MAXIM"), announced that it has entered into a binding Memorandum of Understanding ("MOU") for the acquisition of 100% of the shares in a French cogeneration company (the "Company"). The Company owns and operates six (6) cogeneration facilities in France totaling 38 MW of installed generating capacity. The facilities provide electrical energy to Electricity de France, the French government owned utility, under long term power sales agreements and thermal energy to various industrial customers under long term thermal sales agreements. The total purchase consideration is approximately $10 Million CDN and will be paid 50% in cash and 50% through the issue of redeemable preference shares. The acquisition is conditional upon Maxim completing and being satisfied with its due diligence of the Company. The closing date for the acquisition is targeted for October 31, 2001.<<
Be careful. Rule of thumb suggests that for every MW of power production, you spend $ 1 million. Here, there were 38 MW purchased for ONLY $10 million. Why so low?
There is a long outstanding "maxim" in investing, "you often only get what you pay for."
And then look at the purchase condition. $5 million cash, and $5 million in pref shares. Pref shares??? Why would that be?
Maybe because with pref shares, you get your dividend stream regardless of the share performance. I wonder what entitlements are offered should MXG go under? Do they get superior claims on the assets of the company compared to other shareholders? (Hint: YES). I wonder if they have handcuffed the company to maintaining certain debt-to-equity ratios to ensure that their pref shares are always worth something.
MountainHiker