ESG 0.00% 86.5¢ eastern star gas limited

playing the takeover

  1. 179 Posts.
    The following is a small analysis of the best way to play a potential takeover offer of ESG by (Let's assume) STO within the next 12 months. A discussion regarding the likelihood of takeover is not what I want to pursue, rather the best of two means through which to capitalise on such an event, owning ESG shares or HGO shares, the unsystematic risk within two completely separate companies is also ignored.

    ESG share price: 75 cents
    HGO share price: 40 cents

    In the event of an ESG takeover, HGO can obtain 100% of the per share price greater than $1.00 multiplied by 175,544,143 shares.

    Let's assume the sale price of ESG is around $2.5B, equating to a share price of around $2.80, HGO receives $1.80 x 175,544,143 = $316m or 76 cents per HGO share. If we simply add this to the HGO share price you get 116 cents and a gain of 290%. Not bad, however, if you own ESG shares then at a sale price of $2.80 the gain is 373% over your purchase price of 75 cents!

    At what point would it be better to buy HGO shares? Based on the above the price of ESG would need to be $0.97 for you to be better off purchasing HGO shares and receive the best gains, alternatively if HGO drops to 29 cents you would be better off purchasing HGO shares. Interestingly the Takeover Price has only a small affect on the relationship.

    For those interested, it's easier to build a quick excel spreadsheet with variables of HGO price, ESG price, and Takeover price.

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