Q: Given the recent dividend cut and share price decline, is AQN now a viable takeover candidate? I understand that an asset manager had acquired as small stake recently that gave them some seats on the board and they are pushing for change. The PB is cheap but they have a lot of debt. What is this company possibly worth per share if all debt was paid off?
5i Research Answer:
We have long thought AQN could be a target. We are sure frustrated shareholders would be quite happy to entertain offers after two dividend cuts and such a decline in the stock over the years. Starboard owns 8% of the company and has been pushing for changes as noted. The asset sale will lower debt but debt will still be north of $6B. The valuation question is difficult, as debt can only be paid off with asset sales, cash flow, or equity issues. An equity issue would dilute shareholders' value. If the debt 'magically' disappeared the stock would likely be worth $20+.