Your view would be correct if an assumption was made that the SIR share price would not have fallen if a bid was not made. My view is that this is an incorrect assumption. WSAs share price has fallen from $4.55 in February to $3.06 today, whereas IGO has fallen from $5.85 just before the announcement to $3.93 today. Both of these represent a 32% fall in their respective SPs. In other words, the IGO fall equals the SP fall of WSAs (albeit over a slightly shorter time frame), with WSA being the closest analogy to SIR on the market based on past share price comparisons.
The better assumption to make is that based on the WSA share price, it is likely that SIR would also have fallen by around the same level in the absence of the IGO bid. The SIR share price in February was between $2.60 and $3.10, meaning the current SIR share price could have been trading between $1.82 and $2.17 in the absence of the offer.
Speculation of course....but at least reasonably objective speculation.
It should be remembered that the premium being paid by IGO is still around 20% to the one month VWAP hare price of SIR just prior to the media speculation broke about the IGO takeover - which artificially drove the SIR SP up.
Plus, a tie up with IGO will provide a better spread of risk and a more secure balance sheet than is currently the case with SIR alone - including access to the 2015 dividend in September.
IGO Price at posting:
$3.92 Sentiment: None Disclosure: Not Held
SIR Price at posting:
$3.10 Sentiment: Hold Disclosure: Held
