BMO comment on the Chinese deals for Daylight Energy and Kalahari Minerals.
CONCLUSION: Clearly the Chinese have a longer term view and see this market sell-off as a great opportunity to buy assets on the cheap. This morning we have news on two deals:
1- Sinopec is offering C$10.08 cash per share or $2.2BN for Daylight Energy or a 120% premium to friday's close or a 43.6% premium to the 60 day weighted average price. DAY is 50/50 oil vs nat gas producer all in Alberta, Canada. Their assets are focused on the Pembina and Cardium fields. The company recently purchased a large land position in the Duvernay oil play. It also had one of the highest debt levels with a debt to cash flows of 2.3:1.
Companies which have underperformed this year due to high debt levels and/or perceived higher risk are : Petrobakken, Crew Energy, Nal Energy, Legacy Oil &Gas and Penwest. They may benefit from this opportunistic bid.
2- China Guangdong Nuclear Power ( CGNPC) confirmed this morning it resumed talks with Kalahari Minerals plc on a recommended takeover offer. The press highlights that the price of 270p per share, a 10% premium from friday's close is being discussed ( but a 26% premium to the close of friday a week ago). CGNPC had bid 290p before the Fukushima accident and has been trying to renegotiate the price down since. Kalahari's main asset is a 42% stake in Extract Resources which is developing the Husab uranium deposit in Namibia.
Companies which could benefit from this renewed interest in uranium are: Uranium One, Paladin, Denison & Bannerman.
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