Am I correct to understand that owners of BRY will receive 1.25 shares of LNCO in exchange for each unit of BRY once merger completes? With 25K to invest, I could buy 570 shares of BRY, which will be 712.5 shares of LNCO, which at current stock price would be worth 26,668. Basically, I would gain 1.6K just from merger. Assuming price of LNCO will improve, it will be even sweeter. Is this correct or am I missing something?
This deal goes through because insiders own 10% of the company. In addition, institutions own 80% of BRY. Institutions always vote with management and directors unless the managers/board of directors are idiots which is not the case here.
Management said they are behind the deal to Len Cooperman this week. This is a done deal.
new2investing: Yes your math is fundamentally correct... Now look at what happens to your stock valuations should the merger not be approved - the stock tanks like a rock,- (to the price levels pre-announcement of merger acquisition by LNCO - which I note is far far down from the current 42.00+/- levels and becomes dead money for an extended period of time... If BRY stockholders are fearful of the merger than sell it now and book your profits...Otherwise hold for the merger which is a win-win situation for both BRY and LNCO, plus receive the added benefit of monthly dividend/distributions that begins in July, which you would not receive from BRY... Your choice...
My view is that the merger is still in the best interest of both sides. BRY shareholders should research LINE and get comfortable with how it operates. There is no guarantee that the short attack will end with the merger approval, but short positions will get very expensive to hold and a short squeeze is very possible. If the deal fails I think BRY will fall farther than LNCO just due to the number of shares outstanding and the yield. In fact LNCO would be more likely to experience a short squeeze.
If the deal goes through the dividend is raised 6% to ~10% yeild at today's low price and it gets paid monthly. Additionally the credit rating of the combined company will be raised. This will give immediate opportunity to refinance at lower rates as LINE already had a higher rating than BRY. Drilling activity will increase because LINE has output hedged. Operations will be consolidated in many locations -more savings, and I would be surprised if a share repurchase plan is not authorized.
Of course minus taxes, broker costs. Yes, your math is correct. Close enough. If the deal fails you will get a sever haircut and take 6 months of dead money. I say double what you want to invest. Hit for the fences.
Last week, I bought 80 BRY at 42.70 which converts to 100 LNCO at 34.16.
So, what is the problem?
I know you think the deal is scary. But we are just playing with Bernanke funny money.
Go for it.
For LNCO to drop to $34 would be below its 52-week low of 35.14. Not gonna happen. Even so, if that occurred, it would quickly bounce right back up after Berry acquisition and improved dividend. This is a no-brainer!
Sentiment: Strong Buy