Done & Dusted, page-61

The below is a recommendation from Rivkin and would explain the buying last week plus the queue of buyers at $4.55....
So id suggest shares traded last week are in retail hand and not POSCO...


Current advice: Buy SXY at no higher than $4.55

Latest recommendation: 13 December 2021, 3:30 pm

SXY was on our watchlist while the company negotiated with South Korean steel group POSCO, and has this morning announced that a binding scheme implementation agreement has now been signed. This deal has been a bit of a head-scratcher in that SXY’s focus is mostly on the Australian east coast gas market with POSCO’s gas arm having a more global tilt, and the intrigue goes even further with Gina Rinehart’s Hancock negotiating with POSCO about taking 49.9% of the purchase, although it should be noted that the deal is not conditional on Hancock’s involvement.

The deal is worth $4.60 to SXY shareholders plus an allowable $0.05 interim dividend, and when compared to recent transactions in the oil and gas sector, POSCO is paying a big price. The deal is subject to customary conditions, none of which stand out as a concern. The FIRB may take a look but given SXY’s size and POSCO’s history of investment in Australia, it’s hard to see an issue.

SXY is trading this morning at $4.55, which represents a 2.2% return if the deal on the table goes ahead. SXY expects the deal to complete by mid-March, so the annualised return is just under 9% which is worthwhile given the low risk the deal falls over. Considering the high price being paid, we don’t expect competing offers, but stranger things have happened, and if Hancock and POSCO can’t agree to terms perhaps we could even see a new bid from a standalone Hancock.

Given the factors mentioned above, we are going to treat SXY as an arbitrage, so we wish members to be strict on price. We therefore recommend members buy SXY at no higher than $4.55 for a low-risk, short term Event Portfolio investment opportunity.