Q: Hi,
Assuming the conversion from a trust into a corporation, and if you were holding the shares, what would you do as it pertains to the offer @$37 prorated based on the current trust holders choice. At a minimum one will get a third of their units in cash, and the balance is new shares. Would you take the money now and buy back the corresponding shares once the dust has settled? I don’t see the share price maintaining $37 over the short term, if it would, it should already be there.
Your thoughts?
Assuming the conversion from a trust into a corporation, and if you were holding the shares, what would you do as it pertains to the offer @$37 prorated based on the current trust holders choice. At a minimum one will get a third of their units in cash, and the balance is new shares. Would you take the money now and buy back the corresponding shares once the dust has settled? I don’t see the share price maintaining $37 over the short term, if it would, it should already be there.
Your thoughts?
5i Research Answer:
There is still about a 5% discount to the value of the offer, reflecting deal risk (low) and time value and the unknown pro-rata allocation. We think, if one likes the stock now, then one should like it 'more' with the conversion. The corporate structure is cleaned up and we think this may allow a higher valuation, over time. We would be fine utilizing cash received in the offer to buy more units to replace those tendered, but we do not think this needs to be done all at once, or immediately. But net/net we do think the transaction will create more shareholder value over time.