Deal Hangovers!

There was an article in the G&M business section last week that tweaked my interest. It was about announced takeovers that were trading below the takeover price because of the global credit crisis. The biggest case of this was/is BCE which has been much blogged about including here on Fulton Associates.

Of course the one that caught my eye was an oil and gas producer, Tanganyika (TYK), an oil producer in Syria. It has had an impressive increase in production this past year, but the more impressing thing is the buyer - Sinopec. This is a Chinese national refiner and petrochemicals company which is partially owned by China Petroleum and Petrochemical company. Did I say this is a Chinese national oil company already? Sinopec Group last month lost to India's Oil & Natural Gas Corporation (again state sponsored) in the tussle for Imperial Energy Plc (a Russian firm)

Bottom line is that even with the credit crisis, who else has the cash to make a modest $2 billion acquisition?

TYK was trading at $26 a day prior to the takeover bid. The bid is for $31.50. On Friday Oct. 24, it closed at $23.98. This is a 31% upside!

It has been well reported that Chinese companies have been buying up resource assets throughout the world to secure supplies for their growing domestic economy. While nothing is risk free, the board of directors of TYK unanimously support this deal and other insiders and officers of the company have signed on to a lock up agreement with Sinopec that represents 16% of the outstanding shares.

Please tell me why I shouldn't back up the proverbial truck and load up!