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Copano Energy LLC Message Board

  • brumar_lv brumar_lv Feb 17, 2013 4:05 PM Flag

    Observations on the Buyout

    It's difficult for most shareholders to know the true worth of Compano. Only "insiders" know this, and even they may not. But it's clear many "outsiders" disagree with the merger price. At least 10 law firms are suing Compano, all claiming that Compano sold to KMP for too low a price.

    But there is another way to judge the value to shareholders. Currently Compano pays a $2.30 annual dividend. In the merger each Compano share converts to .4563 KMP shares, which pays a $5.16 annual dividend.

    For every 1000 shares of Compano the annual dividend is $2300. Following the merger that 1000 shares converts to 456.3 KMP shares and an annual dividend of $2354.50 (an increase of $54.50). Almost a wash.

    This suggests the value placed on Compano was determined by setting the merger price at precisely the level where the impact on Compano shareholders is basically zero. In other words, the merger value was not set based on the intrinsic worth of the company. It was set to ensure shareholders saw no impact on their dividend income stream.

    If you consider the Compano share price prior to the announcement (about $33), the marketplace valued Compano at a price well below the merger price. Stock market theory says that stocks are always fairly priced so that suggest shareholders got a good deal ... more than the company was worth. The merger price should have been lower by this theory. KMP bumped up to the price to avoid stockholder lawsuits, which they got anyway.

    It's obvious Compano shareholders are moving from "weak hands" to "strong hands" ... from higher risk to lower risk. KMP is a huge rich powerful company ... Compano is not. Using this analysis, Compano shareholders got a good deal.

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