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Penn West Petroleum Ltd. Message Board

  • glebeglebeglebeglebe Jul 21, 2013 8:44 PM Flag

    Possible buyout

    I'm not speculating that there will be a cash buyout or not, but I've had several stocks over the years that were bought out for cash, and what generally happens is (1) there is a vote by the shareholders on the cash offer, which usually means nothing to ordinary guys like us because the big guys hold the most shares, (2) they set some deadline for closing the buyout deal, to see if there are any other bidders, (3) if there are no other bidders, the deal becomes final on the deadline, and our PWE shares disappear form our trading accounts, and a cash credit appears in our accounts for the bid amount, and usually, (4) one or more shareholders' law firms will sue the board of directors on behalf of the shareholders, claiming that the tender amount was too low. For example, if the buyout is for $20 per share, the lawyers will say a proper valuation should have been, say, $30 per share.

    The lawyers then fight it out in court, which means that each side retains experts in corporate valuation, and they depose each other's experts. The case moves along slowly, and then a year or two later, the lawsuit is typically settled -- they rarely go to an actual trial. The settlement will "split the baby" in some way, but the bottom line is that we would likely get more money later on as a result of the settlement. For example, if the parties settle the lawsuit for $5 above the tender offer, then we will all get that amount in our trading accounts for each share of PWE we owned, during the appropriate period.

    Once again, this is only a general outline and it may not play out like this at all, but I've seen it several times. It takes patience, because the lawsuits can sometimes drag out even more than a few years. We won't be charged directly with legal fees, by the way, because the lawyers will take their fees from the total settlement fund.

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    • We should all GTFO when the buyout is announced and the stock shoots up. Nothing good ever happens waiting for a deal like this close...just put it in the rear view mirror and move on to the next one.

    • IN the words of a famous comedian, I resemble that remark. I, too, owned PWE before the Halloween Massacre, among maybe 10 Canadian business/royalty trusts....TransForce, Clearwater, etc. I lost 50k in 1 day. Soon afterwards, I bought back most of them because they were very cheap. Most that I picked were bought out and was fortunate to recover most of that loss over a 6-12 month period. But then I couldn't believe it about 6 months ago to learn that PWE was at $10. After a little checking and then a little more, I'm in with 14k shares @ 10.14US.

      • 2 Replies to infinitidrivr
      • I resemble your comment :) PWE & Precision Drilling in my case...I remember thinking...Did I really just lose $50k in one day...I too doubled down and got out with a profit and now I'm back for more!

        Sentiment: Hold

      • glebeglebeglebeglebe Jul 22, 2013 1:50 PM Flag

        Sounds good for you -- I think you did much better than I did. The thing that made me angry about the "Halloween" event was that it came about only a few months after the Canadian PM had solemnly promised that CRTs would NOT be taxed as corporations. This was the major reason that I invested in several CRTs, because I was not looking for capital gains, but looking for the regular income from dividends, as many retirees in Canada were doing to supplement their pensions. And then suddenly to have that promise flat-out broken, I really couldn't believe it.

        And having held PWE for so many years, when the share price was typically in the $25-$35 range, it's hard for me to believe where we are now, too. Nice to see it going up for a change, though, whatever the reason might be.

    • GOOD post.

    • arbormist12 Jul 21, 2013 9:44 PM Flag


      Based on your experience, what is the possibility the stock will get sold, how soon, and what do you think price would be?

      Sentiment: Strong Buy

      • 1 Reply to arbormist12
      • glebeglebeglebeglebe Jul 22, 2013 12:44 PM Flag

        I wish I could give you some non-speculative answer about specifics like that, but I can't. My post wasn't intended to add to the speculative "buyout fever" that seems to be going on here, but rather, was intended only to explain to some here what generally happens IF there is a cash tender offer for PWE, since several posters seemed very confused about the basics of what typically happens.

        One thing to keep in mind, in addition, is that IF there is a buyout, it doesn't necessarily mean an all-cash buyout. It could involve some cash, some stock in the acquiring company, warrants, options, notes, all kind of things, depending on the deal that the insiders and lawyers put together. Frankly, IF there is a buyout, I would prefer "all cash" because it is simpler than the more complicated deals.

        As an aside, I am a long-time bagholder of PWE, and bought my first shares before the "Halloween massacre" that decimated most Canadian royalty trusts, several years ago. I don't even know what my cost basis is right now because I've bought and sold batches of PWE stock over the years since then, but I would guess that I'm "in" at around the $25/share level. I used to think this could be a $50 stock, and I don't think I was alone.

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