Enauta shareholders hated the exchange ratio that the company itself suggested in its merger proposal with 3R.
As a result, Enauta shares fall 9% today, with a projected volume of R$230 million, 5 times the average of the last 100 days. 3R’s shares rose 2% with the news – given that the proposal included a premium of 12% over yesterday’s closing, which puts a floor on the stock.
Enauta proposed that 3R shareholders keep 53% of the combined company, and Enauta shareholders keep 47%. If the proposal considered the market value of the two companies at yesterday’s closing, the exchange ratio would be 50.7% for 3R and 49.3% for Enauta.
O chairman da Enauta, Mateus Tessler, told Brazil Journal that the exchange relationship was built to seek “a transaction that was acceptable to both sides.”
“Enauta’s stock was better priced and less out of date than 3R’s,” said Mateus. “It’s not that we are giving a discount on Enauta’s price, it’s that we are seeing value in 3R where the market was not seeing it, which is mainly in assets offshore and infrastructure, which were very poorly priced.”
The assets offshore of 3R include the Papa-Terra and Peroá fields, which have synergy with Enauta’s offshore assets. 3R also has a refinery and a midstream which are currently underutilized.
Mateus, who is also a partner at Jive, Enauta’s second largest shareholder, also said that 3R has much more certified reserves than Enauta: 500 million barrels of 2P reserves, compared to just 180 million for Enauta. The merger with 3R, therefore, would bring more longevity to Enauta.
“On the other hand, Enauta brings more present value, because the greatest potential for generating EBITDA next year is on our side. If we were to look only at reserves, the exchange ratio would have to be even better for 3R, but Enauta brings more present value, so the average of these two factors led to this ratio.”
For the chairman, even though the transaction momentarily hurt the stock, with some analysts criticizing the exchange ratio, “in the medium/long term it will generate a lot of value for the company.”
In addition to the direct synergies from asset integration, which Enauta calculated at more than US$1.5 billion, Mateus said that there are still “substantial indirect synergies” that the company is trying to quantify.
These indirect synergies essentially have to do with repricing the new company’s credit risk. While Prio can currently raise funds in dollars at a rate of 5%, 3R raises around 10% and Enauta, 8%.
“If the new combined company manages to raise 6%, this tax saving on a debt of US$ 2 billion would bring a very large cash generation over the years. The potential of this alone would provide almost US$1.5 billion more in synergies.”
The transaction would also create a company capable of absorbing other companies in the sector, including PetroRecôncavo — which was in negotiations for a merger with 3R and was overturned by the proposal.
“That is one deal of scale, capital cost and capital allocation capacity to have market reserves, with large suppliers interested in having large contracts with the company. So the bigger you are, the better. O game It’s not about having power, the game is about being associative to bring more value at home,” said Mateus.
“After this transaction, a player how PetroRecôncavo immediately became a target for this new company.”
Another benefit of the transaction will be to drastically increase the liquidity of the stock, which will open up space for Bradesco and Santander — who became Enauta shareholders by converting debts into shares — to exit the position without hurting the stock.
“It takes away a overhang of paper, because these banks would naturally exit at some point, and now they have a smooth exit door,” said the chairman. “The average daily volume of this combined paper should be among the top 15 on the Stock Exchange.”
Enauta must make a call with the market tomorrow to explain the rationale for the transaction.
Pedro Arbex
Tags: Chairman Enauta Exchange ratio fair transaction generates medium term
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