After a take-over agreement was announced, the stock of Cinch Energy Corp. (TSE:CNH), (PINK:CCHEF) flew high and almost hit the ceiling. This is no surprise, as it often happens in such circumstances. The fact that CNH jumped near the levels of the offered take-over price is of little surprise too.
Yesterday, the stock went more than 38.5% up, climbing from $1.27 to $1.76 at trade-closing. The realized volume was truly amazing – over 15M shares changed hands. CNH fully deserved to win the grand prize for being the most active item on the Toronto Stock Exchange (TSE).
The reason the shares went so much crazy was Tuesday’s release, where Cinch announced to have entered into a take-over agreement with Tourmaline Oil Corp. Under the arrangement, the latter will acquire all of the outstanding common shares of Cinch based on the following condition: stockholders will receive 0.06366 of a Tourmaline common share for each Cinch share held. According to company representatives, it means that shareholders will get $1.77 per share.
Hence, it is quite easy to understand why the stock price jumped to $1.76 on Wednesday. The future behavior of the shares is not so easy to predict and depends largely on how the take-over story around Cinch will conclude. The Board of Directors unanimously advised Cinch stockholders to approve the deal with Tourmaline Oil because “it is in the best interest” of the company.
In early July, shareholders should cast their votes at a special meeting. Until then, it is probably of little use to foretell how the stock price is going to alter in the coming days. Perhaps, it is worth mentioning that Cinch reported rising revenues and increased oil production for the first quarter of 2011. The company’s output advanced to over 4,000 boe per day by mid-April.
