ATDB – Alimentation Couche-Tard having fun and making money with acquisition math.
April 19, 2012
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Unfortunately circumstances are rare that an announced acquisition for the acquirer that shareholders are rewarded. Usually the acquirer gets slaughtered while the shareholders of the acquired company celebrate with high fives. So what makes Couche-Tard acquisition different?
First, let’s look at the chart
Alimentation Couche-Tard (ATDB) with weekly price bars, EBV Lines (colored lines) and model price (dashed line)
For those interested, a daily updated chart of ATDB subsequent to this post will be maintained on Facebook, here.
Our key take-a-ways without reiterating any of the details outlined in the newspapers are:
1. Before the deal was announced the company had a 20.4% upside to model price. The deal help close the value gap because of the underlying future growth of the business.
2. The company will finance the acquisition with debt. ATDB has a “Solvency Ratio” (see Key Concepts) of 1.33 before the deal was announced. This acquisition with debt will move ATDB “up” the “Solvency Curve” making them more efficient in terms of solvency or the use of debt on their balance sheet.
3. Though we haven’t seen any numbers yet, and probably won’t until the acquisition is closed. We are willing to guess that what the company took on in terms of theoretical earnings (increase) they more than offset with additional earnings. We will report back on this when the deal closes and the numbers are released.
Very well done!