Disclosures: No investments
Stunning, in one word!
AEPL, a Promoter group company is proposing to merge with Selan Exploration, a listed company, with Promoter holding of 30.46% as on date.
Basics are as follows:
- Selan has about 4.5 – 5 times more equity and assets than AEPL; and AEPL has no revenues
- AEPL shareholders will get the following shares from Selan for giving the above business
- Which reduces minority shareholders by a whopping 39.47% (= 69.54% – 30.07%)
*
So the natural question is, what value does AEPL bring for getting in additional ~ 40% of the shares post merger. Selan has not yet said that in its filings. We can however find out the least it needs to bring in
(a) Value held by Public shareholders in today’s Selan (i.e. pre-merger) = 69.54% of MarketCap of ~ ₹ 775 cr; i.e ₹ 539 cr
(b) Value of Public shareholders in today’s Selan after the merger = 30.07% of ~₹ 775 cr = ₹ 233 cr
Thus the Public suffers a substantial reduction in the value of today’s Selan held. This loss can be calculated as ₹ 539 cr (pre-merger) – ₹ 233 cr (post merger) or ₹ 306 cr of value of today’s Selan.
The Synergy and Audit Committee however have said the merger may “Enhance value for Company’s shareholders, resulting in creation of a leading energy company in India”
So the Public needs to see atleast commensurate value of what it has today; i.e ₹ 539 cr; post merger. But today’s Selan would contribute only ₹ 233 cr post merger. So the merger has to see the value held by the Public increase by atleast ₹ 306 cr.
An increase of ₹ 306 cr of Public value, with reduced holding to 30.07%, means that the overall value brought in by AEPL is ₹ 1,018 cr (i.e. ₹ 306 cr / 30.07%). We can infer thus that AEPL is valued at ₹ 1,018 cr for the merger, while Selan is valued at ~ ₹ 775 crore today (as I write this). Thie fundamentals are below
Which is why I am really stunned!!!
But that’s not all. This “bigger than Selan” company entered into a loan agreement with Selan to borrow upto ₹ 100 cr of Unsecured loans at an effective rate of 14.25%!
It’s surprising that a better valued company than Selan could not get a better rate from the market and had to come back to Selan!!
Putting all of the above in an Excel sheet
Sources: All BSE filings
*could not understand how Pubic shares go up by 3,156 on account of the merger
| Subscribe To Our Free Newsletter |
