Enercare buys more Direct Energy
On November13,2015 Enercare bought (in a block trade) almost 4 million shares of Direct Energy.This is an ongoing process as Enercare bought Direct Energy in principle on October,2014.However they announced that they bought it in stages and so their earnings accretion is progressing over time.
October 2014
The deal with Direct Energy closed in October,2014.It is not clear how many shares they owned at that time.As it appears to be a cash and stock deal.However earnings from Direct Energy were included in their third quarter report.But in November they bought another 4 million shares and moved a step closer to acquiring Direct.The shares were originally traded to Direct Energy at around $13.50 a share in 2014 and redeemed at $15.61 a share. Gross proceeds were almost $65 million (including transaction costs).Enercare says this will increase earnings from Direct Energy in the next quarter.
The deal is worth about $61 million and may total $65 million with transaction costs.The purchase was bought from cash on hand (around $30 million)and a drawdown on their credit facility.Direct Energy made about $2 profit on each share redeemed for a total of almost $8 million profit.Enercare says it will be able to add $2.2 million in cash flow in 2016 because of the deal.
Summary
This blog believes that this is a "win-win" situation.The increase in the price of Enercare means that Direct Energy made more from the sale of shares originally used to purchase Direct Energy.The transaction is now worth more than in October,2014.Enercare gains from the increase in cash flow that will come from the 4 million share transaction.Enercare goes on to say that there will likely be more redemptions of shares of Direct Energy in the future.Mangaement says that "it sees a gap between the market price of shares and the value of business and future prospects".This blog sees that early redemption of Direct Energy shares will put upward pressure on the Enercare share price. use Blogdaleupsome for analysis of utilities;see Blogdaleupsome for corporate analysis
October 2014
The deal with Direct Energy closed in October,2014.It is not clear how many shares they owned at that time.As it appears to be a cash and stock deal.However earnings from Direct Energy were included in their third quarter report.But in November they bought another 4 million shares and moved a step closer to acquiring Direct.The shares were originally traded to Direct Energy at around $13.50 a share in 2014 and redeemed at $15.61 a share. Gross proceeds were almost $65 million (including transaction costs).Enercare says this will increase earnings from Direct Energy in the next quarter.
The deal is worth about $61 million and may total $65 million with transaction costs.The purchase was bought from cash on hand (around $30 million)and a drawdown on their credit facility.Direct Energy made about $2 profit on each share redeemed for a total of almost $8 million profit.Enercare says it will be able to add $2.2 million in cash flow in 2016 because of the deal.
Summary
This blog believes that this is a "win-win" situation.The increase in the price of Enercare means that Direct Energy made more from the sale of shares originally used to purchase Direct Energy.The transaction is now worth more than in October,2014.Enercare gains from the increase in cash flow that will come from the 4 million share transaction.Enercare goes on to say that there will likely be more redemptions of shares of Direct Energy in the future.Mangaement says that "it sees a gap between the market price of shares and the value of business and future prospects".This blog sees that early redemption of Direct Energy shares will put upward pressure on the Enercare share price. use Blogdaleupsome for analysis of utilities;see Blogdaleupsome for corporate analysis
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