1. The deal significantly discount's SLR's share price/EV based on the pre-merger market trading of each share 2. SLR has a high liquid asset situation which is especially valuable when a. Interest rates are high and capital is expensive b. When the gold sector valuations are well down despite near all time high gold price is AUD terms due to across the board cost inflation in the sector: i. this creates a tremendous opportunity for SLR to acquire undervalued stressed assets and develop them 3. SLR liquid investment in RED will likely be transformed into a quasi capital raising further diluting SLR shareholder value 4. There is no compelling operational synergy bewteen SLR and RED 5. SLR has demonstarted a disdain to explainging to shareholders how they actally get a return. What is the strategy? There is none. Share prices reflects the markets expectation of future cashflows to shareholders. 6. As a shareholder I do not NEED SLR to diversify it's risk as it has bugger all and I have a diversified portfolio in any regards.
If I were a RED shareholder i would probably have mixed feelings on this deal. The great thing is it absolutely de-risks RED by extinguishing the debt and the out of the market hedge book, but where are the operational synergies, would we not be better off merging with Genesis? AND how is the proposed CEO going to treat shareholders when he can't even be bothered fronting the briefing session?
SLR Price at posting:
$1.00 Sentiment: None Disclosure: Held
