"post completion, shareholders will own shares in a much bigger...

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BullishBearish

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30/04/24

10:16

Post #: 73576275
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Originally posted by JoeKing2: ↑

BullishBearish - to be fair, when there's a paper takeover offer made, the share-price of the company making the takeover usually falls. Just look at the BHP share-price recently.

SLR negotiated a price with the RED Board for a takeover and called it a merger of equals presumably as part of the PR exercise. What's happened since is really just the playbook from "Takeovers 101". An external factor - the increased gold price - has lifted all boats and SLR and RED are currently trading higher than they would have been if the AUD gold price was back at AUD$3,000 or so. But I'd suggest SLR is currently trading lower than it would be had it not initiated the takeover.

My own view is that the "win" for everyone involved in this takeover is that post completion, shareholders will own shares in a much bigger entity which will find itself included in more indices and with a greater weight within indices. As such demand for shares in the "whole" (the new entity) from index huggers will be much greater than demand for the individual entities would have otherwise been going forward.

I'd also suggest that larger SLR holders (in fact I'd suggest the vast majority of SLR shareholders) understand the game. Prior support from larger shareholders would have been obtained by the SLR Board for this takeover (possibly as early as when SLR acquired its initial 11% stake in RED).

When the takeover/"merger" was first announced, someone on the SLR HotCopper thread did a survey of shareholder for and against. Whilst those against were in the majority, the number of responses was miniscule.

To me that suggests that a) SLR shareholders in the main see the merits of the proposal or b) SLR shareholders don't respond to surveys.

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"post completion, shareholders will own shares in a much bigger entity which will find itself included in more indices and with a greater weight within indices"
No one is disputing the above, it's a fact. What's being disputed is the split in the new co which is worth a significant amounts of money to some of us. Based on the preferred operating valuation the split should be closer to RED 41:59 SLR. The reason for this is evident in the report DCF where SLR has significant front end cash flow while RED has significant front end drag and back end mine of life capex.

Last edited by BullishBearish: 30/04/24

SLR Price at posting: $1.46 Sentiment: Buy Disclosure: Held
2 Upvote

1 Great analysis

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