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Arch Coal Inc. Message Board

  • jdoobah jdoobah Jun 28, 2013 8:01 AM Flag

    transaction values ACI at $30.00 share

    shorts betta cover

    Sentiment: Strong Buy

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    • perhaps I should do some math for you:

      The assets sold to Bowie were expected to generate pro forma EBITDA of $90 mln in 2013 which is already 10% higher than ACI reported for the whole company in Q1 - when annualizing the first quarter's EBITDA we arrive at 2013 pro forma EBITDA of around $330 mln - so the Utah operations were expected to generate around 27% of the company's earnings this year.

      Remember also the buyer doesn't assume any debt obligations related to the Utah assets so the debt at ACI will remain unchanged.

      so ACI sold more than 1/4 of the company's earnings power for $435 mln which calculates to a valuation of around $1.6 bln for the whole company (including the now sold assets) BUT before considering the debt on the balance sheet.

      as of March 2013 the company had around $1 bln in cash but more than $5 bln in debt so adding the calculated remaining asset value of $1.2 bln would leave a whopping close to $3 bln net debt position for shareholders effectively meaning their shares are worthless.

      With this knowledge the stock looks like an absolutely great short here.

    • what are you talking about ? please share your math with us

      until then I would strongly advice to short the shares based on this news