idg trading opportunity in biv too

Tusker Gold (TKA). The worlds largest gold company, Barrick, has put a bid of 80 on the table for this small gold explorer, a premium of about 90% to its price before the bid. The controlling shareholder Indago (IGO) only launched it in December, and before you know it Barrick comes knocking. The board is recommending the 80 bid and the stock is trading at 77. So there is 3 on the table for a deal that will take around three months to complete. That will deliver an annualised return of 1516%, which is not too bad at all. The current offer looks very generous, but you never know: another player could come in and make another bid or the gold price could go up, which would deliver an even better outcome for shareholders.

This story gets more interesting with Indago, which looks as though it will agree to the offer. Indago has 67.5 million shares in Tusker, so it should get about $54 million from the deal, which will come in at $40 million after tax. That would give it $65 million in the bank and, with 100 million shares on issue, an implied value of 65 a share but right now the stock is only trading around 44. Normally when you look at companies that are trading below their cash backing level, its a very good sign, but in this case Indago is seeking permission from shareholders to change itself into a small mining investment group. That means 65 a share will be invested into this transformation and who knows what Indago will do with it. So it could be a company to keep your eye on.