With hindsight, it seems pretty obvious.
On October 6 I wrote this article for GuruFocus on California oil and gas producer Venoco (VQ, Financial). At the time Venoco was trading at $7.50 and shareholders had been offered $12.50 per share from CEO Marquez in a going private transaction.
Today guess what happened? The Venoco board of directors agreed to the offer from the CEO and shareholders will get $12.50 per share.
DENVER, CO-- (Marketwire - Jan 16, 2012) - Venoco Inc. (NYSE: VQ), a leading independent energy company, announced that it has entered into a definitive merger agreement under which Timothy M. Marquez, Venoco's Chairman and CEO, who, together with affiliated trusts and foundations, holds 50.3% of Venoco's common stock, will acquire Venoco through a wholly owned entity, Denver Parent Corporation.
Under the agreement, Venoco shareholders, excluding Mr. Marquez and his affiliated entities, will receive $12.50 per share in cash upon completion of the transaction. The price represents a premium of 63% to Venoco's closing price on Friday, January 13, 2012, the last trading day before the announcement of the transaction and a premium of 75% to the volume-weighted one-month moving average for that date, and implies a total enterprise value of approximately $1.5 billion.
The special committee of the board of directors that was formed in August 2011 to review the proposal from Mr. Marquez, with the assistance of independent legal and financial advisors, completed a thorough review of the proposal, investigated various alternatives and other potential bidders, and unanimously concluded that the transaction with Mr. Marquez was in the best interests of Venoco's minority shareholders. Based on the unanimous recommendation of the special committee, the agreement was also approved by the full board other than Mr. Marquez, who abstained.
Rick Walker, the Chairman of the special committee, stated, "After a thorough assessment, with the assistance of independent legal and financial advisors and after a comprehensive 5-month search of the market for superior alternatives, we concluded that this transaction will maximize value for our public shareholders. We are also pleased to have successfully negotiated a 'majority of the minority' approval right for our public shareholders."
Mr. Marquez said, "I am pleased to announce this transaction, which I believe will deliver significant value to our public shareholders. I am proud of the strong track record of our company, and our valued employees who make that possible. This transaction will position Venoco for the long term and allow our company to continue investing in its future in an era of continued economic uncertainty."
For several months subsequent to the offer from Marquez, the stock price of Venoco did not venture much north of $7.50 despite the $12.50 offer. I’m not sure if Mr. Market didn’t think Marquez could get the financing for the takeover, but for whatever reason the gap between the stock price and the offer did not close.
That is a 66% gain in three months since I wrote which isn’t too shabby. The annoying part for me is that I only held a token number of shares so I won’t profit from the deal. Why didn’t I own more? I’m not exactly sure. I guess the size of the discount to the offer was so large I thought that I was missing something.
A terrible reason to miss out on a big return isn’t it? Afraid that Mr. Market knows more than me.
What is especially annoying is that this is the second time that this exact thing has happened to me this year. Round one involved Hathor Exploration which I also wrote about for GuruFocus. In the case of Hathor I noticed that this small company had just found a large high-quality uranium deposit the value of which was clearly well in excess of the current stock price. It was also very clear that the discovery made Hathor a very obvious acquisition target. What made it even simpler was the fact that the Hathor CEO appeared on the Canadian BNN network and basically said that the company was in play.
Sure enough, Cameco and Rio Tinto quickly got into a bidding war and Hathor was acquired for $4.70 per share which was a 78% premium to the $2.64 price at the time of my original article.
But again, no great victory for me because while I owned a decent position in Hathor, I had sold immediately after the original Cameco offer and missed out on a lot of upside that emerged during the bidding war.
So what have I learned? I’d say that it has again been reinforced into my head that I shouldn’t assume that just because something looks too cheap that Mr. Market knows something I don’t. It could quite likely mean that the stock is simply too cheap.
I’m especially disappointed that I didn’t profit more on the Venoco deal because even if the transaction didn’t close, the $12.50 per share offer should have been a pretty strong indication of the value of the company. After all that offer was coming from the CEO of the company who knows the assets of the company better than anyone.
Ironically, despite this 66% premium to the current share price, and the price when I suggested Venoco, the board of directors is likely going to take some heat for letting the company go too cheaply.
I’ve got my eye on a couple of Western Canadian oil companies that are likely in play and are trading at large discounts to what they are worth. Again, the discounts are large, but this time I’m not going to miss out on the upside.
I’ll write about them for GuruFocus shortly.
On October 6 I wrote this article for GuruFocus on California oil and gas producer Venoco (VQ, Financial). At the time Venoco was trading at $7.50 and shareholders had been offered $12.50 per share from CEO Marquez in a going private transaction.
Today guess what happened? The Venoco board of directors agreed to the offer from the CEO and shareholders will get $12.50 per share.
DENVER, CO-- (Marketwire - Jan 16, 2012) - Venoco Inc. (NYSE: VQ), a leading independent energy company, announced that it has entered into a definitive merger agreement under which Timothy M. Marquez, Venoco's Chairman and CEO, who, together with affiliated trusts and foundations, holds 50.3% of Venoco's common stock, will acquire Venoco through a wholly owned entity, Denver Parent Corporation.
Under the agreement, Venoco shareholders, excluding Mr. Marquez and his affiliated entities, will receive $12.50 per share in cash upon completion of the transaction. The price represents a premium of 63% to Venoco's closing price on Friday, January 13, 2012, the last trading day before the announcement of the transaction and a premium of 75% to the volume-weighted one-month moving average for that date, and implies a total enterprise value of approximately $1.5 billion.
The special committee of the board of directors that was formed in August 2011 to review the proposal from Mr. Marquez, with the assistance of independent legal and financial advisors, completed a thorough review of the proposal, investigated various alternatives and other potential bidders, and unanimously concluded that the transaction with Mr. Marquez was in the best interests of Venoco's minority shareholders. Based on the unanimous recommendation of the special committee, the agreement was also approved by the full board other than Mr. Marquez, who abstained.
Rick Walker, the Chairman of the special committee, stated, "After a thorough assessment, with the assistance of independent legal and financial advisors and after a comprehensive 5-month search of the market for superior alternatives, we concluded that this transaction will maximize value for our public shareholders. We are also pleased to have successfully negotiated a 'majority of the minority' approval right for our public shareholders."
Mr. Marquez said, "I am pleased to announce this transaction, which I believe will deliver significant value to our public shareholders. I am proud of the strong track record of our company, and our valued employees who make that possible. This transaction will position Venoco for the long term and allow our company to continue investing in its future in an era of continued economic uncertainty."
For several months subsequent to the offer from Marquez, the stock price of Venoco did not venture much north of $7.50 despite the $12.50 offer. I’m not sure if Mr. Market didn’t think Marquez could get the financing for the takeover, but for whatever reason the gap between the stock price and the offer did not close.
That is a 66% gain in three months since I wrote which isn’t too shabby. The annoying part for me is that I only held a token number of shares so I won’t profit from the deal. Why didn’t I own more? I’m not exactly sure. I guess the size of the discount to the offer was so large I thought that I was missing something.
A terrible reason to miss out on a big return isn’t it? Afraid that Mr. Market knows more than me.
What is especially annoying is that this is the second time that this exact thing has happened to me this year. Round one involved Hathor Exploration which I also wrote about for GuruFocus. In the case of Hathor I noticed that this small company had just found a large high-quality uranium deposit the value of which was clearly well in excess of the current stock price. It was also very clear that the discovery made Hathor a very obvious acquisition target. What made it even simpler was the fact that the Hathor CEO appeared on the Canadian BNN network and basically said that the company was in play.
Sure enough, Cameco and Rio Tinto quickly got into a bidding war and Hathor was acquired for $4.70 per share which was a 78% premium to the $2.64 price at the time of my original article.
But again, no great victory for me because while I owned a decent position in Hathor, I had sold immediately after the original Cameco offer and missed out on a lot of upside that emerged during the bidding war.
So what have I learned? I’d say that it has again been reinforced into my head that I shouldn’t assume that just because something looks too cheap that Mr. Market knows something I don’t. It could quite likely mean that the stock is simply too cheap.
I’m especially disappointed that I didn’t profit more on the Venoco deal because even if the transaction didn’t close, the $12.50 per share offer should have been a pretty strong indication of the value of the company. After all that offer was coming from the CEO of the company who knows the assets of the company better than anyone.
Ironically, despite this 66% premium to the current share price, and the price when I suggested Venoco, the board of directors is likely going to take some heat for letting the company go too cheaply.
I’ve got my eye on a couple of Western Canadian oil companies that are likely in play and are trading at large discounts to what they are worth. Again, the discounts are large, but this time I’m not going to miss out on the upside.
I’ll write about them for GuruFocus shortly.
