While Daylight Resources Trust’s (OTC:DAYYF) offer of C$7 per share in cash and trust units for Highpine Oil & Gas Ltd. (OTC:HPNOF) looks like a done deal, there may still be room for a better offer, according to Blackmont Capital analyst Gord Currie.
Looking at the takeover metrics, he called them "modest" at C$11.77 boe of reserves and C$29.784 per boe of daily production, given that Highpine produces high-quality crude oil and has the best balance sheet in its peer group.
Some of the factors standing in the way of competing offers include the fact that management and directors have agreed to tender their shares to the offer, as well as a C$20-million break fee. However, Mr. Currie pointed to several reasons why a rival bid could surface.
“Although the offer price represents a significant premium to Highpine’s market price, it is not rich,” he told clients, noting an estimated net asset value or C$9.98 per share basic or C$10.25 fully diluted.
Highpine also has C$177-million in undrawn bank lines, a cash offer would likely trump Daylight’s mainly paper offer, and Highpine would be attractive to other gas-levered intermediates since it is 60% weighted to crude oil and has a terrific balance sheet.
Acknowledging that this is purely speculative, Mr. Currie upgraded Highpine to Outperform from Sector Perform and raised his price target to C$8 per share from C$5 in anticipation of a higher bid.