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.
The NPV of the future distributions should already be reflected in the price of the stock, discounted based on inflation and the uncertainty associated with them occurring. As such, the analysis while well-intentioned, double counts the value of the distributions.
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.
The dividend discount model of stock valuation assumes that the entire value of the firm is paid out in dividends with no residue value.
It is more accurate to use the bond valuation model in this case because LNCO will be an ongoing concern with a residual value. Ten years from now, a LNCO shareholder will have collected a dividend stream (interest payments) and will still be able to sell their LNCO shares, thereby recovering their principle.