Tesoro's Tender Offer Tussle

Independent refiner Tesoro (NYSE: TSO  ) and billionaire investor Kirk Kerkorian's Tracinda Corp. have taken some interesting steps in the takeover tango.

In late October, the MGM Mirage (NYSE: MGM  ) founder offered Tesoro shareholders $64 a share in order to top up his newly disclosed stake in the firm to just less than 20% of shares outstanding. That was right before Tesoro released some spooky third-quarter numbers.

Tesoro: "No more, though."
Tesoro's board announced last week that it was "neutral" on the tender offer, but it went ahead and instituted a poison-pill defense all the same. This cagey gambit of corporate governance, which has given control investors headaches for 25 years now, would effectively prevent Tracinda from acquiring any more shares. On Monday, Tracinda said that it was "concerned" and "weighing its alternatives."

Tracinda: "We rescind-a!"
Kerkorian and Co. slept on it, and that poison pill didn't taste any better on Tuesday morning, so now the tender is toast. Punters who piled into the stock soon after the initial offer would now be looking at as much as a 25% hit to their holdings.

The speculators got stung, but those of us fortunate enough to be watching from the cheap seats have an interesting opportunity before us. Tesoro is now undeniably cheap.

Some of you like PEG ratios, and Tesoro's is in bargain territory. If, like me, you prefer the enterprise value-to-EBITDA metric, the business is valued at just five times this cash flow proxy. Of course, Valero (NYSE: VLO  ) and Frontier Oil (NYSE: FTO  ) look similarly cheap on these metrics as well. I like both of those outfits, but their refined product margins aren't looking as robust in the quarter to date, judging by the incredibly handy regional differentials listed on Tesoro's website. Give this firm a close look if you're inclined to refine.

For more Texas tea:

• The Helmerich Maneuver
• Quick Take: Sasol's Alleged Wax Cartel
• The Bizarro Valero