Some good news (albeit a bit lucky) from DVN: major shareholder CIMIC has announced an intended takeover for the remaining shares it doesn't own. The offer price is 75c cash and will have minimal conditions. Successful or not, CIMIC is rolling the board and will appointing a new CEO to turn the business around, and as it already owns 50.6%, CIMIC effectively controls the company and can call the shots.
Good to see a major shareholder taking an active position.
This leaves the question of what to do with DVN shares. As CIMIC owns such a large stake, it's not likely another bidder will bother coming along. This means CIMIC will end up with all the company (if it gets to 90% it may just move to compulsory acquisition) or end up with somewhere between 50.6% and 90%.
Given the offer is 50% of book value, you could argue that CIMIC is being opportunistic, but I wouldn't be doing anything different if in their shoes. If you decline the offer and hold your shares, you are taking the view new management will come in and clean the place up, and there is always a possibility CIMIC will come back later with a higher offer to mop up residual shareholdings. That's not an unreasonable bet.
Kristian
CIMIC has controlled DVN for a long time. Playing the white knight is a little rich in my book. CIMIC has watch and presided over the mess that has been DVN. It could have rolled the DVN the board any time over the last few years as they have held a controlling shareholding. CIMIC's takeover bid is an opportunistic low-ball bid at a time when shareholders are most pessimistic.
ReplyDeleteThe more I think about this, the more the situation smells. You could go so far as to say the play all along has been to smoke-out DVN shareholders to the point of capitulation. The offer only made mention of the recent DVN share price, not the underlying value of the business. The offer just so happens to be half of the NTA. I've seen this years ago in CMI - management flushed out CMIPC shareholders to accept a low offer. IF this view is correct, then don't expect CIMIC to come up with a more generous offer any time soon. They will take what that they can now, let the share price drift and then maybe come back for the rest at a later time.
ReplyDeleteThe plot thickens.
ReplyDeleteA higher bid emerges and CIMIC basically shoos the new bidder away.
But what does CIMIC do now? Do they let their bid expire or at least match the Forum offer? Does CIMIC really want to acquire DVN or are they looking to lift their shareholding on the cheap?
Either way it confirms the obvious; CIMIC is trying to take advantage of DVN's smaller shareholders and the gloom that has lingered around DVN of late!!
Agree! Just writing a post now.
ReplyDelete