Naturally, initial market reaction is to revalue the shares of each according to the offer for the same combined MC.
Based on Friday close
SLR = 225.5M shares @$2.84 = $640.4M MC
IGR = 934.4M shares @$0.315 = $294.4M MC
Total is $934.8M.
Now the new entity will consist of 225.5M +934.4M/6.28 = 374.3M shares. $934.8M / 274.3M = $2.50 per share.
IGR becomes the equivalent of 934.3M/6.28 = 148.8M SLR shares, for an equivalent MC of $372M at $2.50. Re-rated SP of existing IGR shares becomes $2.50/6.28 = 39.8c.
At time of posting, SLR is $2.595 and IGR is 0.402. Combined MC is $585.2M + $375.6M = $960.8M, up $26M or 2.8%.
SLR just need to take the short term pain of re-rating to get the long term gain of more efficiency and production rates.
Now, consider the FY13 production forecast for the new entity, at 200 - 250koz. Low end of that, at $1000/oz operating profit, using P/E of just 7, gives MC of $1.4B, or low side estimate of target SP of $3.73 by June 2013, with upsides on lower cash costs (from merger efficiencies), POG and produced ozs.
Viva SLR!
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