RE: This deal is "insurance/hedging"I like your thinking on this.
I am also long both SST and CS. Found SST first then bought CS later. After listening to the conference call I took away one thought expressed that resonated with me. The market has continually kept trading sst at a discount to slw on all valuation criteria. I think that was the biggest point made. On any way you value the comparison sst got a very light offer here. I recently have the same issue over with Nova Chemical. Again a very light offer. in this market though light offers are IT!!!! We have to keep it all relative in that an offer made to day but compared to yesteryears models or metrics doesn't fly in this current mess. Look at dow chemical for a great example...
Being long CS I can see that CS is the primary goal and SST was a spinoff taking someone elses concept and putting it in motion. The concept works and would continue to work. In reality it is working better then the original model and at a discounted cost factor. This causes 2 things to happen.
1) Silver Wheaton can not command whatever the market can pay as there is a competitor for capital.
2) Competition is created for future silver streams that need the financing.
These are both not great for Silver Wheaton so getting SST out of the picture is an added bonus to there business model. I am not sure whether a competing offer will come along. Best chance is shareholders say NO! and slw passes the sweetener.
For CS this deal makes lots of sense some that you covered in your post regarding the potential for base metal pricing to drop further. CS has a great hedge on its copper now so could cash that out. If this deal closes CS has a very liquid asset in SLW shares. Just about as good as cash as SLW trades huge volumes daily. Also CS has a pipeline for large future financings as the slw warchest is larger. I guess in owning both stocks it makes it a little easier to swallow.
My thoughts are the price is light. It did not require being sold right now. The market is punishing to everything right now and I would have expected management to possibly at least ride it through the choppy waters. The first quarter with the new streams may have been enough to entice some new investment. It will always be a sales job to get the same valuations that the market leaders command but at least you have the measurement to work towards. Just my 2 cents worth.