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Gold/Mining/Energy : Avenor (avr-tse) - Repap buyout (rpp-tse)
AVR 3.800-5.2%10:40 AM EST
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To: Louis S. Besignano who wrote (21)1/15/1997 8:23:00 PM
From: Phoenix   of 290
 
The Globe and Mail article in fact was doing some analysis about Avenor. It also mentioned about the takeover and suggested the takeover would not get 2/3 of Avenor's shareholders' approve because
of Repap's heavy debt. I think Financial Post also had an article on
Feb. 14 saying the same thing. I think people somehow overreact to
the articles and suddenly the Repap's price dropped about $0.80 in
two days.

I buy Repap based on several things:

1. From all the articles I read from the past year, most people
agree that the industry is already at the bottom.

2. If Avenor wants to takeover Repap at a ratio of 1 for 4.25, that
means Repap must have some value there. Also Avenor talked to T-D
and Royal Bank and both banks agree to the arrangement. All
articles (at least over 5) talked about Avenor and all agreed that
Avenor had a good management team. So I also believe they are
making a good decision.

3. Before the takeover, there were already several articles talking
about Repap's debt and its book value but its price was always
above the book value price. The book value is about $4.50 and I
am not paying extra for the stock.

4. Nothing happened to both stocks before the takeover talk. But
Repap's price suddenly drops and it seems people afraid that if the
takeover fails, Repap cannot survive. But I think people react in
a strange way. If the takeover fails, Repap is still here and doing
business. Up to now, I do not see an article which suggests that
Repap will be in trouble if the takeover fails. If anyone worries
about Repap's debt problem, the person should worries it long
before the takeover talk. Why the person worries it now when
Repap gets another company's support?

5. If the takeover goes ahead, I can see Avenor will sell some of
Repap's asset which it doesn't need to pay down the debt. So the
debt problem is not as bad as people think.

6. To me, I worry about a company's cash flow more than debt. Avenor
has arrangement with T-D and Royal Bank for the takeover so I do
not worry Avenor has enough money on hand or not after the
takeover.

I think Pepap is a good buy so my opinion may be bias. All information
I got are from articles I read. I do not have any inside information.
Of course, I hope Repap does not hide any information from the public.

Good luck to all Repap's shareholder.
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