Ann: Recommended cash offer for takeover by schem, page-18

re: Ann: Recommended cash offer for takeover ... Hi ASF

Generally speaking the discount to a takeover offer will include the opportunity cost (time value) and the risk associated with deal not going through. My personal opinion (definitely not an expert) is that there are unlikely to be regulatory hurdles with this takeover due to the small scale and early development stage of EOC. For me the only risk (which I consider very minimal) that the deal will not go ahead is if the market were to fall 20% (ASX Top 200 at 3600). I really can't see that happening and in any case with coal having already dropped so much already it is possible even if this did occur that U&D would still want to go through with the deal anyway.

So back to your question of why is there a 20% discount, well I am not sure as I probably expected the share price to be around 35c at this stage. Possible explanations outside of concerns that the deal won’t go through are that there are still a lot of people bailing at the discount as they experienced the 18c price. EOC may be too small to attract institutional traders implementing a takeover arbitrage style trade, therefore if the U&D are not buying on market and we still have nervous sellers the discount will remain.

Personally I am not in a rush to sell and I am more than happy to earn 20% over 4 months for what I see as minimal risk.

Best of luck mate.

I am the Iceman!