An alternate view

Notwithstanding all the views that this the worst deal ever, I thought an alternative view might be worth putting forward.

Downer are stating that they will make NPAT of $175 million for FY 2017 - SPO are stating circa $85 million, so circa $260 million on consolidation. Given the large cost base of SPO (in excess of $2.3 billion), stripping out 2% of costs doesn't seem that big an ask, particularly when the discipline of a new owner is applied.

So you potentially end up with a company making $260 million plus generating an additional $45 million of pre-tax savings ($30 million post tax) which equates to a proforma NPAT of $290 million.

Assuming a multiple of 15 times earnings (down from DOW's circa 20 times pre the SPO announcement), you get a valuation of $4.35 billion

Post the capital raising, and assuming the transaction goes ahead, DOW has circa 600 million shares on issue. This equates to a $7.25 share price valuation based on these simple maths.

Yes there are many risks with this transaction, and one plus one doesn't always equal two (or higher), but with Fenn and Sheppard as ex-KPMG colleagues, I suspect there's a fair chance that they reckon this combination might add real value over time.