is on file with the SEC today. While this deal
may break apart (the current price is at the high end
of the range prior to the sale) there is no lock up
of any current shareholders and management may
consider other offers if they materialize.
We have some agreement that value after the sale
should approach $4 to $8. But I do not agree that we
will see $7.50 shortly after the liquidating dividind
is paid, unless Nanocor sales of significance become
much more apparent. They need to DEMONSTRATE that the
minerals businesses can be grown aggressively to get to a
15% P/E and this takes time. Also, corporate costs
must be shown to be scaled to the new size. This too
may take time.
I see a strong challenge to the
lower end of the range as some sell their mineral
business shares. We are now looking at $1 to $2 being
added to the liq. div. and we may see that for some
time until either the company demonstrates their view
of undervalue by opportunistically buying the stock
back and demonstrating a "floor" or a higher value
becomes readily apparent from repeatedly posting
improving better numbers.
My last thought - it is
possible to still see a higher bid for the whole company
over the next month.
I have been buying, though I certainly have my
concerns about the structure of this deal, but it
definitely makes sense to keep the shares in a tax-free
account. The subdued buying of the stock after the
announcement might be due to the fact that current buyers are
walking into a short term capital gain.
calculate the expected return as follows:
sales price of Chemdal is $24.30 per share, less $7.40
in taxes leaves $16.90. $1.85 or so per share will
be used to reduce debt. Transaction and other costs
will bring the windfall down to $14.50 per share
distributed to shareholders.
The remaining company
should have $300 million in revenues and profit of about
$.50 per share, calculated as follows: $1.25 per share
expected 2000 earnings pre deal, AMCOL keeping about 40%.
Note that debt service will be reduced by about half,
or about $.15 per share per year. This improvement
might be offset somewhat by some fixed costs being
supported by a much smaller company.
profitable company with low debt and growth of about 10% (a
recovery in Asia could further improve growth) should
easily sell for a PE of about 15. Indicated post deal
price: .50 * 15 = $7.50
$14.50 + $7.50 = $22.00,
which should be realized in three months, or 42% more
than AMCOL's current price of $15.50. 42% annualized
is 186% per year. Rarely are such returns apparent
with so little risk.
I haven't done the math, yet. Next week I'll
tackle the 10-K's, AR's, & such to see what I come up
My first impression that ACO will be worth holding
is based primarily on the fact that they're only
selling 40% of they're sales, they're debt-free after the
sale which will eliminate one drag on earnings. Also
of note is the company is publicly stating it
expects eps growth of 15% or more from the
nanocomposites. While they could be wrong or even falsifying
reports, there's no factual evidence of either & making
groundless claims violates SEC rules. They could get their
pants sued off. Insiders own 27% of the stock per the
But also less debt. Has anyone done a calculation
as to what the value of this company is after the
sale? My crude estimates put us at 4 to 5 per share,
assuming the nanocomposite potential does not come
through. And if it does? Over 10/share.
estimates we are undervalued by a buck or two, which I
write off to the time
Thanks 'OneOfTheGoodOnes' for that reply.
Do you know what will be left after the sale? will
the remaining company still be profitable and what is
your view on what the share price will be after the