When the net present value of incremental dividend stream that BRY shareholders will receive is taken into consideration, the value of 1.25 LNCO for 1 BRY, is ~$70.
The NPV of the incremental dividend stream that they will receive over the next ten years, ($3.08 x 1.25) – 0.32, discounted by an interest rate of 10% is $21.69; at an interest rate of 0% it is $35.30.
The value of the stock value component will be worth $30 to 36 share price of LNCO x 1.25 or $37.50 to 45.00.
Add the stock price of $37.50 - 45.00 plus the NPV of the incremental dividend stream, $21.69 - 35.30, the transaction is worth $59.19 - 80.30. Split the difference and the value is ~$70.
This is how institutions and mutual funds will be looking at the deal.
I'm long LINE, but I don't see the logic here. You're saying that BRY shareholders should value the stock at $37-$45 AND add the PV of the dividends? Isn't the PV of the LINE dividend already baked into the price of LINE??? That logic shouldn't matter whether you're a BRY holder or not...what you're saying is that LINE is worth $47-$64....but the reality is that it's worth $32 today. That's the price. The market doesn't ignore dividend payments (unless it expects them to be discontinued of course). The PV of the LINE distributions is already factored by the maret in the share price...whether you agree it's being valued fairly by the market is a different matter.
Break the offer into it's two components. One piece is the LNCO price x 1.25. The other piece is the incremental dividend stream discounted to today's dollars. It's the same a calculating the value of a bond.
Think of LNCO's stock price x 1.25 as bond principle and the discounted dividends as future interest payments discounted to today's dollars.
Your point is well taken. But, the npv is a little over 24 dollars at 10% and a little over 27.50 at 8%. Annuity calculators are readily available on the web. The calculation requires the use of monthly payments...not annual.