Post by
blackdog on Dec 21, 2020 9:46am
Obsidian lowers minimum tender condition for Bonterra offer
Reading Obsidian’s announcement this morning is a grammer school lesson in over-using puffy adjectives (can we put ‘compelling’ away please?). This larding of entirely self-serving bullshit is absolutely nauseating.
So the argument is that the share prices have converged. (Almost; and, timing being everything, how the overnight drop in WTI is going to play out in this will be interesting.) In a thread-bear market; extremely thin trading; and in the run up to Christmas and year-end.
The spurt in OBE’s trading and share price in the lead-up to this last minute announcement has been curious. It is worth noting that even this trading has been exceedingly thin and that today’s short report shows that short covering would be a significant portion of the volume and a factor is the price increase (See WTI price rise and fall above). Thinly disguised in the verbiage today (and, I might add, already more than fully evaluated by Bonterra’s shareholders) is that this deal only benefits Obsidian's major shareholder. If any do have a second look, they should keep this fact at the forefront of their examination.
Not to dwell on the issue of voting turnout at annual meetings, I note that while Obsidian trumpets that it had a 91.4% approval (in arrears) for making this offer, only 36.77% of shares outstanding voted with only 33.63% of shares outstanding voting to approve (3.1% of shares outstanding; 8.6% of shares voted, voted against). This after Bonterra had easily assembled significantly more than enough shareholder support to reject the original offer.
This rejection was an irritating cost to Bonterra’s shareholders; who on Obsidian’s side is keeping track of what all this is costing its shareholders? How does this continuing saga recommend either Obsidian or its management to Bonterra shareholders at all? Or Obsidians’, for that matter.
This latest move is more than tiresome. The Obsidian offer has been a load of hot air from the start. Today’s effort serves to underline how hollow the “compelling” argument is.
Let’s be clear up front: whatever superficial appeal Obsidian’s concept has, it fails because Obsidian’s track record is as a seriously failed company. Perhaps new management (even interim management that has made it clear that it is NOT committed to anything more than getting (at least some of) it’s principal’s capital out) might turn this around, but a cancelled office lease and a bunch of re-arranging of the balance sheet over a couple of quarters is not evidence that it can suddenly make money finding and selling oil, and is not enough to recommend any business combination.
Much is made of the prospect of some suspiciously large and round numbers immediately propelling the proposed merged enterprise into a brave new world of higher valuations and re-instated dividends. Accepting this eye-wash begs the question of how this will be achieved without new capital to finance the investment that would be needed to effect these changes. Change costs cash; Obsidian has none; isn’t making very much; and would have less after paying the costs of even a “no-cash” takeover.
The background to the offer makes it very clear that Mr Loukas does not see himself running the new company, nor does he see taking on Bonterra’s management. So who would be in charge of the hard work and detail of turning this vision into a reality? The management that ran Penn West? Or the lawyers who drafted the reams of conditionals and caveats that make up most of the offer?
Takeovers need committed management and committed capital. Obsidian has neither; so what is its game here?
Comment by
Hendrick3 on Dec 21, 2020 8:14pm
Excellent note and responses. BNE is the more troubled entity between the two and without this deal BNE is going down. They have OBE to thank for cracking the $1.80 level yet they don't seem to get that without the deal it's a zombie wasteland and at some point banker intervention like Pengrowth and Bonavista will occur.