Takeover Premiums on the Menu as Early 2022 M&A Activity Looking to Surpass 2021

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Mar 28, 2022, 08:30 ET

FN Media Group Presents USA News Group News Commentary

VANCOUVER, BC , March 28, 2022 /PRNewswire/ -- After M&A activity rose by 64% on the previous year, 2021 set a record last year with a massive $5.9 trillion in deals. Now analysts at Morgan Stanley are projecting 2022's M&A Outlook will show continued strength after 2021's record year. So far in 2022, this wave of takeovers with premium prices includes the acquisitions of Alleghany Corporation (NYSE:Y) by Berkshire Hathaway Inc. (NYSE:BRK-A, BRK-B), Mandiant, Inc. (NASDAQ:MNDT) by Alphabet Inc. (NASDAQ:GOOG, GOOGL), and Petroteq Energy, Inc. (OTCPK:PQEFF) (TSXV:PQE) by Viston United Swiss AG.

Seeing value in its operations supporting cleaning up the oil and gas industry in North America, Viston United Swiss AG made a premium offer for clean technology company Petroteq Energy, Inc. (OTC:PQEFF) (TSXV:PQE).

Petroteq specializes in oil production, having developed proprietary technologies that enable the company to produce oil without water, waste tailings ponds and emissions. In addition to sustainable oil production, their technology cleans oil sands of all hydrocarbons, creating a purified sand as part of an overall ESG strategy.

At its offered C$0.74 price point, the takeover represents to shareholders approximately 279% over the closing price of the Common Shares on the TSX Venture Exchange on August 6, 2021. That's a 1,032% premium over the 52-week volume weighted average trading price on the TSX-V prior to the offer originally made in April 2021.

The offer itself is also a 100% all-cash consideration, representing an instant payback to current shareholders. Currently, through its US shares on the OTC under the PQEFF symbol, shares of Petroteq are trading around US$0.3505 (C$0.44) on March 21, 2022. At that price point, the C$0.74 still represents a potential 68% premium over the more current trading price.

Already earlier this year, Petroteq's Board Members shared their unanimous intention to tender their shares through the offer.

"We are particularly pleased with the recognition this shows of our technology which we have taken from inception to commercial viability as a one of its kind in oil sands eco-friendly, green extraction," said former Petroteq Chairman and CEO, Dr. Gerald Bailey, who retired in January. "We had always forecast a great future. However, we respect the value of this offer to shareholders and if it can be achieved it will reward our many dedicated supporters."

According to a third-party report by Broadlands released in February, economic analysis focused on the markets available for Petroteq's sale of the three categories of by-product sands.

As per the report, an extraction plant producing 5,000 bpd is estimated to be capable of yielding 6,000 tons of sand per day or 1,860,000 tons per year, and that silica flour is postulated to be 15% of the saleable product, fracking quality sand 55%, and bulk sand 30%.

The economic forecast is based on 20 years of sales from such a 5,000 bpd operation, following two years for construction and start-up of the extraction plant and sands processing facility and related infrastructure.

"Broadlands evaluation report provides the potential economic benefit from the sale of sands is significant and provides an attractive enhancement to the value of the extraction process further enhances the forecast value of the Petroteq extraction technology," said Petroteq's CTO and Interim CEO, Dr. Vladimir Podlipskiy. "The Petroteq operation can produce "green" energy with high quality oil extraction, while also remediating the oily sand and turning it into a useable, marketable resource."

Moving ahead into the likely acquisition by Viston, Petroteq has announced its willingness to assist the buyer with its CFIUS filings.

Shares of Alleghany Corporation (NYSE:Y) surged upon news of a takeover by Berkshire Hathaway Inc. (NYSE:BRK-A, BRK-B)—jumping nearly 25% in premarket trading on the first day after the weekend.

The insurer agreed to be acquired by Berkshire Hathaway for approximately $11.6 billion, wherein Alleghany investors are set to receive $848.02 per share in cash—which is nearly 15% above the stock's 52-week high of $737.89 reached last May, and above the all-time high of $847.95 Alleghany hit in February 2020.

Unlike the clearer value upgrade for Petroteq shareholders mentioned above, there's seemingly less clarity with the Berkshire Hathaway deal. While on the surface the 1.26x takeover price compared to Alleghany's year-end 2021 year-end book value of $675.58, analysts are skeptical of the benefit to Alleghany shareholders.

"This a great deal for Berkshire, and mediocre for Alleghany," said Charles Frischer, a longtime investor in both Berkshire and Alleghany. "It's accretive to Berkshire's intrinsic value and Berkshire gets a potential successor to Ajit Jain."

According to data compiled by Bloomberg, the transaction is Berkshire's largest since its US$37.2 billion, including debt acquisition of Precision Castparts in 2016.

There is a 25-day go-shop period, and it is possible that Alleghany could attract interest from other bidders.

Google's parent company Alphabet Inc. (NASDAQ:GOOG, GOOGL) recently announced its intent to purchase cyber security leader Mandiant, Inc. (NASDAQ:MNDT) (previously known as FireEye) for $5.4 billion, inclusive of Mandiant's net cash—marking Google's second largest acquisition in company history.

As per the deal, Google LLC pays out $23 per share in an all-cash transaction, which came as a nearly 19% premium over the $19.38 price point Mandiant shares were trading at over the weekend before trading recommenced on the following Monday.

"It's an extraordinary player in cybersecurity," said Alphabet CFO Rush Porat of Mandiant. "It is going to enable us to provide this end-to-end solution in this very important area and, again, it goes to our commitment around cybersecurity but also all we're doing in cloud."

With the deal, Mandiant's customer base includes leading U.S. government agencies, the company said in its most recent annual report. For example, in 2020, then known as FireEye, the company said it was working with the Federal Bureau of Investigation on a cyberattack.

For more information go to: https://usanewsgroup.com/2022/03/25/this-quick-turnaround-takeover-is-the-kind-of-play-smart-investors-snap-up-in-a-heartbeat/

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