Eight-Way Break Up of Talisman May Mean 45 Loonies a Share

The new boss at Talisman Energy Inc.(TSX:TLM) might want to consider breaking the company up into several smaller exploration and production companies given the premium trading multiples Canadian juniors are experiencing.

That’s the view of one analyst, who expects John Manzoni will bring a fresh outlook to Talisman and will likely review its assets and strategy, thereby increasing the options for the company’s future value.

“One of the most blatant gaps in current valuation in the equity market is the premium trading multiples of the Canadian-based junior international E&P companies (due to the high growth outlook) compared to the seniors such as Talisman,” Raymond James analyst Stephen Calderwood said in a note to clients.

If it were possible to break Talisman up into smaller country-focused companies, the value creation would far outweigh the negative tax effects of this reorganization, he noted. The eight separate entities Mr. Calderwood envisions would create more than $45 in value for each Talisman share.

He continues to think the company’s asset base exceeds its current share price, calling its the “best value” in the peer group. As a result, he maintained a “strong buy” recommendation and $28 price target.