The last time I posted something here was about a month ago because I
had no new information.
Today I receive the material regarding about the takeover. Right now,
I think most people think the takeover won't happen. If it really
won't happen, I think Repap won't become bankrupt (which a lot of
people afraid of) right away. The backlog for coated paper is over
1 million ton and its revolving credit still have $56 million at the
end of 1996. Also, if the takeover won't happen, Repap will sell some
of its assets which it wants to sell before.
We talked about the book value before and now it is about $0.50. The
reason was Repap wrote-off the Atholville plant for $305.5 million and
it caused the book value dropped a lot. Before, it was about $4.50.
It was not a surprise for Avenor because it was in the Pre-merger
agreement.
The major thing people worry about is the debt ratio. I checked and
the debt ratio will be about 58.3%. I compare with other companies
and in fact it is not that bad.
Canfor - 64% Cascades - 68% Domtar - 58%
MacMillan Bloedil - 67% Scott paper - 68%
(All data are up to May 1996)
If you look at the ratio, Avenor and Repap combined ratio is not out of the line. I think people worry about it because of the total amount
will be more than 3 billion.
I also found out that it used a bidding process and Avenor was the best one. In this case, that means if the takeover won't happen, Repap
may still have chances talk to other companies about another takeover.
Avenor valued Repap at about $5.00. If the next bid was 10% less, it
would be about $4.50. Even if I take away 10% more , it would still be about $4.00. So it is not as bad as I think.
I also found out that Repap directors and senior officers hold a lot
of shares than Avenor. Beside George Petty, there are several people
hold more than 100,000 Repap shares. Hopefully, if the takeover
doesn't go ahead, they will work harder in order to keep their shares'
value.
Check out the material and see what you think.
I keep my fingers cross. |
