Hi Everyone
I really believe this takeover is very opportunistic, based on a couple of value parameters. Note, I have a lot riding on COF and views are from a set of rosy coloured glasses.
Key financial details for Bidder are from
http://data.cnbc.com/quotes/ttek
Valuation Basis One
TTEK revenue versus market capitalisation is:
- Rev $1.8B
- Market Cap $1.6B
COF revenue versus market capitalisation is:
- Rev (reimbursements removed) $0.372B
- Market Cap (at takeover price) $0.1087B
This takeover should add approximately $500 Million to TTEK's market capitalisation immediately. They are paying $108.7 Million for the privilege.
On a dollar valuation comparative of revenue to market capitalisation, COF value is worth up to
$1.45, not $0.425 to the bidder.
Valuation Basis Two
Comparative to Capital Crescent takeover offer of Cardno (CDD)
CDD has Revenue after reimbursements of $1.0Billion
CDD Market Cap is $0.472Billion
CDD takeover offer by Crescent Capital @$3.15 values CDD at $0.5217Billion
If Crescent Capital was to takeover COF at a comparative valuation COF's share price would be
$0.72.
Things that Crescent Capital would benefit from if they took over COF instead of CDD:
- COF have been through a three year restructure period and does not have a massive US operation concentrated on the shale oil industry that no one is investing in anymore because the cost to extract per barrel is at about $60.
- They could pick COF up for far less than comparative value, even if they offered $0.60 per share.
- COF is at the bottom of the economic cycle in infrastructure. History has shown that COF pick up significant valuation when tunnels are being built across Australia. When CityLink was built in 1997/8 this was a peak for COF, as was 2006/7 after completion of the Sydney and Brisbane tunnels.
- The Melbourne Metro Tunnel is getting legs and they are starting to employ key resources to manage build phase at the State Government level. This is a very large infrastructure project and COF is in the box seat to win a lot of work from this one.
In light of no other offers from the market, this is an okay deal. For me, I have doubled my investment, however I was looking over an economic cycle of 3-5 years (rare these days, I know). The value is here and history has proven COF is capable with good management at the helm. Without the takeover, COF could go up to $2 easily.
Best of Luck
Lost
