no goodwill, page-2

"Assume part of the consideration is say 80c cash per share. That would need say $180 Million in borrowings by PRG."

Like most HotCopper members, presumably, I'm a fan of constructive debate, but I tend to be a bit averse to illogical claptrap.

And any hypothesis is only as good as the underlying assumptions behind it.

Garbage-In, Garbage Out, as goes the old adage.

On the issue of Garbage-In, who said anything about a cash component of 80cps? Clearly that makes no sense, which is the reason it is not being contemplated by anyone other than you, ostensibly for argument's sake.

Best, I think, to deal with facts, and assumptions that a reasonably plausible.

To that end, I think the best "cash component" number to use is the one that has been articulated by PRG, viz. 25c., which would result in some $59m of "cash leakage" out of MergeCo, and leave the combined group with $230m-odd in Net Interest Bearing Debt.

And that $230m would be supported by around $160m of combined EBITDA and $130m in combined EBIT, for solvency metrics of NIBD-to-EBITDA of under 1.5x, NIBD-to-EBIT of 1.7x and EBITDA-Interest cover in excess of 9x and EBIT-Interest cover close to 8x.

I think if you surveyed 100 financially literate professional investment managers and/or company executives, I think you will find the overwhelming majority of them would deem those sorts of metrics to be eminently manageable.

But of course, if you really wanted to make your point, I'm not sure why you stopped at just 80cps as the "assumed"cash component. Why didn't you go to 90c or $1.00? Or $1.20. Then MergedCo would be really over-geared and the acquisition would be made to look properly obscene.

Like I say, its all about the assumptions: if you torture the assumptions hard enough, they will confess to any crime you want them to.


"Is such an outcome (80c cash component) good news for the possible merged group?"

No it clearly wouldn't be, which is why it will never happen. Which makes the hypothesising about it decidedly pointless, I would have thought, absent the pursuit of dramatic histrionics.