merger details out, page-158

On reflection and digestation I think that {barring a better offer in the meantime} this deal will and must go through in the end. Texon management have backed themselves and higher priced average holders into a sorry corner. Not sure about exact numbers but I seem to think that Texon were committed to drilling 10 wells by the end of 2013 or lose their leases.
Once again, if their intent was all along to explore, prove up and monetise then their timing & execution has been woeful.

One would have thought that when the share price was around 70-90c they would have done a DECENT capital raising then, drilled and proved up more aggresively, cleaned up their respective issues on the WI part of the leases and monetised it when the POO was around the $100 mark and market sentiment was a whole lot healthier than now. What did we get, a half baked sale process that dragged on for 6 months when dawn was fast approaching. Now we propose a merger 6 weeks out from the "fiscal cliff" and skittish markets. A real gamblers mentality from this management.

So, if the deal were "sealed" today then we get 38c per share PLUS whatever value that Talon lists at. I assume 4c cash backing for Talon {thats the only real close figure we can put on it at the moment} What value other assets are given remains to be decided by the market. Lets say it lists at 10c. So, value now is 48c per Texon share if the value were to be immediately crystalised for those wishing to sell immediately. Those that are averaging in at 60 or 70c a share will either have to wait for SEA to prove up this EFS value or sell immediately at a loss.

My own take is that SEA shares {assume neutral market sentiment until the deal is sealed} will remain at 2x texon share price this far out from the deal being finalised. There is still the possibility of another offer {it would have to be considerably higher if it was a straight cash offer as 30% capital gains would have to be paid}. One would hope an offer does come in which case we may get a 3 for 2 offer from SEA. Whatever, SEA has a bit more to play with in the fact that whatever counter offer they make along the merger proposal would not attract a capital gains tax for texon shareholders.

That is why SEA has not appreciated immediately on this announcement, the deal and hence predicted accretive value off 55c per share risks a counter offer. Not to mention horrible market sentiment at the moment.

My take would be that as the deal draws closer with no counter offer then SEA will appreciate slowly. How long it takes to realise the full predicted 55c per share accretive value remains to be seen. Maybe 1 year away if they can drill and prove up the EFS against a backdrop of better market sentiment.

So, IF that was to be the case and 1 texon share in 12 months time is worth say 65c rather than the current 38c and Talon was worth 10c still at that stage then 75c per texon share realised if you sell. A long wait to break even for those who average around the 75c mark.

Just studying SEA's performance and success of late in MONETISING their assets and realising shareholder value gives me a great deal of confidence that they will realise the FULL value of the EFS acreage. They certainly have the smarts over texon management in this regard. They will have the cash and debt facility and a superior management strategy to achieve it. Let is be done then {barring a superior cash offer in the meantime that would allow us to crystalise our cash immediately}

What I do think also is that maybe Talon is worth sticking with for a while also. Texon management may have been inept at letting the EFS situation get to this point but they have proven that they can find oil and lease the appropriate acreages. Having said that, any decent appreciation upon some successful finds will see me selling pretty quickly. I do not want to go through another scenario like this again.