The ERM Power Ltd (ASX: EPW) share price surged more than 40% in early trade after as Shell Energy Australia made an acquisition offer on the company's results day.
What is Shell offering ERM shareholders?
ERM this morning said it has entered into a scheme implementation deed with Shell under which the oil and gas giant will seek to acquire 100% of ERM shares for $2.465 per share in cash.
The ERM Directors unanimously recommended that shareholders vote in favour of the scheme in the absence of a superior proposal, with the offer price representing a 42.7% premium to yesterday's closing price of $1.71 per share.
The $2.645 per share is also a 38.4% premium to ERM's 1-month volume weighted average price (VWAP) of $1.78 and values the ERM equity at $617 million.
In ERM's full-year results announcement this morning, the Board also announced a 4.5 cents per share (cps) fully franked ordinary dividend, while the Board said it also intends to pay a special dividend of up to 8.5 cps prior to the implementation of the scheme (if approved by shareholders).
What about ERM Power's full-year result?
While the takeover offer has been the big driver behind this morning's 40% share price surge, ERM also released its results for the year ended 30 June 2019 (FY19) earlier this morning.
ERM reported underlying earnings per share (EPS) fell 15% on the prior corresponding period (pcp) to 10.46 per share for FY19.
Underlying net profit after tax (NPAT) fell 14% to $26.0 million for the period as earnings before interest, tax, depreciation, amortisation and change in fair value on financial instruments (EBITAF) also slumped 7% lower to $90.5 million.
An 8% drop in electricity sales volume load was a big drag on earnings, however, management said the forward contracted load at year-end was its highest on record in a sign of a stronger start to FY20 for the group.
However, the Board did announce a 12% increase in its final dividend to 4.5 cps, despite the softer earnings result, in a positive for shareholders.
In terms of the outlook for FY20, management expects to see sales volume increase from 17.7 terrawatt hours (TWh) to 18.5 TWh and opex maintained at $22 million.
However, with the big takeover offer from Shell looming large over results, it appears as though shareholders haven't been too concerned by softer profit numbers as the ERM share price has surged 41.86% higher to $2.44 per share at the time of writing.
