These rooms (oil) at $100 per (barrel) isn't "found" money - it's what was produced from the asset (house/oil field). Would you have liked my analogy better if I spent the $10,000 on a room addition instead of maintenance? (That way I can get more income.)
LNCO now in the red - doesn't look like the market thinks too highly of the deal, at least as of this minute.
I would expect the additional shares will be priced far below $36.75.
More like $30.
But that's a long ways off yet.
So many things have changed since that original announcement.
Remember they also said (later on) the record date for ownership was September 30th. Among other things.
I didn't borrow it...I used the cash that I get from renting out the rooms for $100/hr.
Remember, I said Berry didn't increase their debt load this year.
Not sure what you mean.
Suppose I owned a house, and agreed to sell it to you in February 2013 for $100,000, and for whatever reason you couldn't arrange financing or other issues prevented you from closing.until January 2014. In the meantime I had to replace the roof at a cost of $10,000. I'd want to recoup my cost for the capital expenditure before I agreed to sell it for the same amount I agreed to earlier.
You're forgetting that BRY also increased their assets by $200MM (exclusive of capex) since the deal was announced, and earned over $110MM in the same period.
Speculation is that Linn may not have the funds to do as much after the deal. So Berry may actually accelerate capex spending in the next few months.
Similar to the complaint Hedgeye has against KM for ignoring EPB capex - maybe true, maybe not.
You can't ignore the fact that Berry has increased production by 20% YTY. They could been sitting on their thumbs - but they weren't.
Into new wells to increase production - at least part of it. They (Berry) haven't increased debt to do it - their LTD is $150MM lower now than it was at the beginning of the year.
Berry is spending (or plans to spend) $600 million in capex in 2013. Linn is simply reimbursing Berry for those costs with the increased offer.
Although that is a whole-year number, and Linn had originally planned to own them anyway for six months of the year, that's a bit of a stretch, but still plausible and part of the answer to my question "What has Berry done to deserve it?"
LINN Energy's management will host a conference call on Wednesday, Nov. 6, 2013, at 10 a.m. Central (11 a.m. Eastern) to discuss the Company's third quarter 2013 results and update on the Berry merger. Prepared remarks by Mark E. Ellis, Chairman, President and Chief Executive Officer, and Kolja Rockov, Executive Vice President and Chief Financial Officer, will be followed by a question and answer session.
Investors and analysts are invited to participate in the call by dialing (877) 224-9081.
"The Conflicts Committee of the Board of Directors of Linn has received the opinion of Greenhill & Co., LLC to the effect that, as of the date thereof and subject to the assumptions, limitations, qualifications and other matters set forth therein, the Issuance and the Contribution pursuant to the Merger Agreement, as amended by this Amendment, and the Contribution Agreement, as amended by this Amendment, is fair, from a financial point of view, to Linn."
"The Board of Directors of LinnCo has received the opinion of Citigroup Global Markets Inc. to the effect that, as of the date thereof and subject to the assumptions, limitations, qualifications and other matters considered in the preparation thereof, the Exchange Ratio (as amended pursuant to this Amendment) is fair, from a financial point of view, to LinnCo.
"The Board of Directors of the Company has received the opinion of Credit Suisse Securities (USA) LLC to the effect that, as of the date hereof and subject to the assumptions, limitations, qualifications and other matters considered in the preparation thereof, the aggregate number of LinnCo Common Shares to be received collectively by the holders of Company Common Stock in the Mergers pursuant to the Merger Agreement, as amended by this Amendment, is fair, from a financial point of view, to the holders of Company Common Stock."
Not really, you're forgetting the Berry debt.
The price went from $4.3 B to $4.9B, a $600MM increase, or about 14%.