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Wednesday, November 08, 2017 5:34:53 PM
The deal comes down to two critical components:
1. The swap of ALDW is not challengeable as it's a done deal.
2. We can't expect to hold onto ALDW for another quarter as the General Partner holds all rights associated with ALDW.
It may be alluring, thinking the next quarter will pay us royally but the reality is that ALDW will cease to exist. All monies going in or out that formerly involved ALDW will now be legal property of Delek.
DK is being more generous than Western Refining was when taking over NTI. I'm not thrilled but the 5% premium could have been excluded altogether. DK's yield sucks and I won't be holding onto all shares awarded once the rubble has been cleared from the streets.
In effect, our deal with DK amounts to a recognition of $13.85 for each unit of ALDW we now hold. Ignore the premium as it won't add anything to the unit-for-share swap.
If we were to open tomorrow morning at today's close of $13.58, a buyer should be looking at DK as underwriting a gift to unitholders in the amount of 27 cents as that spells the difference between the close and the takeover price set forth. The takeover price represents a 2% premium over today's close but is actually based on two previous closing stock prices.
My concern now is that the market may not think much of this and that will have us in a deep quandary regarding our making forward moves.
I'm not smelling a rat in any of this but I can't say I'm exactly pleased, either. However---there is a caveat here not to be ignored:
The $13.85 valuation accorded each ALDW unit is engraved in stone. We are guaranteed this amount. We can expect to retain all gains accorded our portfolios thus far, assuming your cost basis is beneath the guaranteed minimum. That's a big deal for a lot of us, I'm sure. Then, factoring in the 43 cents via distribution and things look a little better. In a way, DK is securing us with a hedge in the form of a guaranteed swap rate of $13.85 in addition to letting us have the 43 cent distribution.
Things aren't all that bad in my opinion.
This isn't easy stuff to digest so take a deep breath and agree or disagree with me but---by all means---share your concerns, please!
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