Here’s how I see the value of the offer. It should be noted that...

Here’s how I see the value of the offer. It should be noted that there are many unknowns at present.

Property offer
$55.5 Cash Offer
$20.8 Less Debt
$1.8 Add RNC cash (assuming this has been excluded from the offer)
$36.8 Total cash
$0.308/share, assuming no further dilution of shares
$0.083/share Rental Express units ($10m/119.2m shares)

Assumes RUN s/h actually receive the stated value of $5/Rental express unit (more detail needs to be provided here)

AgencyPlus offer
$5m - AgencyPlus revenue of $2m pa at 50% EBITDA margin gives $1m pa x EBITDA multiple of 5x (all my estimates)

$0.042/share

Offer says 25m HAL shares, but this does not mean anything – what is the value of the 25m shares? The fact that mgmt thought this would be informative to s/h says a lot about RUN mgmt)

Total value: 43c/share (no script discount)
Total value: 37c/share (50% discount to the script portion of the offer)

There is $40m of accumulated losses sitting on the books. This is a substantial asset. I am assuming these losses will go to Rental Express, but there may be a precedent for the losses to bump up the cost base (lower taxes) in any disbursement to RUN s/h. Again, mgmt have provided no detail to s/h on how this could play out.

There are conditions, but my guess is that there is incredibly strong motivation by all parties to complete a transaction even if the final terms need to be amended to get the deal over the line. The business model is so simple and transparent that funding should not be an issue. RUN s/h approval will not be an issue either.

It is unclear to me why Rental Express wouldn’t just make an all cash offer for the listed entity and then offload AgencyPlus on their own terms at a later date.

Knowledgeable merger arb folks will have run the ruler over the value of this deal. I think you could see these guys starting to trade in the last hour of trade on Friday given the change in bid size and frequency of trade. Someone was happy to push it to 24.5c. It will be interesting to see Monday's trade.

My guess is that RUN shares will be capped at the cash component of the deal (30c) until further details are released. There will be plenty of s/h looking to get out at prices above 25c.

I would be interested to hear other views on this topic and/or the complete breakdown of the efficient market hypothesis during trading on Friday morning - I thought I must have messed up my initial calcs when I was able to add to my position in the low and mid teens.