The Share Purchase Agreement contains an agreed estimated NTA (“Estimated NTA” of $4.2 million ....
So if I understand this correctly we are selling EMC for $4.2m. But $4m of that is cash and equivalents, so we're basically giving them EMC for close to nothing. The $5.8m I mentioned above is based on TAG shares being worth 10c, and the current 7.5c share price, far less than 10c, is still above TAG's 6c share price prior to the announcement of the sale, so I suspect we will see TAG shares continue to fall back to around 6c (which is 1c more than the 5c price the independent expert (IE) estimates TAG's NTA will be worth after the merger). If that happens our TAG shares will be worth only 58.5m x 6c = $3.5 million, less than the $4m cash and equivalents that EMC carried.
A cynic could say that the TAG share price was probably pumped to 10c to allow the independent expert (IE) to conclude that the sale is "fair and reasonable". The IE actually calculated the probable worth of TAG shares after the merger to be 5.0 cents NTA (and 4 cents prior to the merger announcement). But then, because the shares temporarily rocketed over 8 cents after the announcement of the merger, the IE used that as a reason to bump up the estimated range of worth of TAG shares to between 5 to 8c.
Continuing the above quote:
... with cash required to be paid by Carnegie in the event actual NTA is lower than Estimated NTA.
So if EMC's NTA at the time of the transaction falls below $4.2m, CCE are on the hook to top-up the difference.
That's my interpretation of some of the merger financials. I hope someone with a better understanding of financials can comment.
CCE Price at posting:
1.9¢ Sentiment: None Disclosure: Held
of $4.2 million ....
