ELD First Offer - It's a low-ballThe offer has been described as $590M offer ($1.21/s), or 52% premium over last Friday close of 0.80. However, all that has been inflated for the benefit of ELD. There are 3 potential options, stock, cash and a combination of both, but the cash component is limited to $129M (about 22% of the total package, read the fine prints) hence if one chose the cash the fine prints say one does not get all the loot at $1.21/s. So, the $1.21/s is quite deceptive.
It was not a surprise to see ELD put this low-ball on the table. But to be realistic, the premium is not +52%, it's more like 1.12/0.8 = +40% as indicated by the market (today). It's a low-ball offer, first shot across the bow.
It's also no surprise to see a drop of about 10% of ELD SP early in the morning. It has recoved somewhat to 4.6 (drop of about 8%). One possible explanation is that ELD shareholders sold ELD shares to get the cash to get in ICG hoping for a better offer from others (Or, it be the fact that ELD would be diluted by about 8-10% by taking over ICG).
About 2 years ago G paid $526M for PRB Borden Lake deposit. This could be used as a base for comparison with ELD offer of $590 M/$1.21 per share. However, if $1.12/s is used then the offer would be $537M (about the same as what G offer PRB). The offer per oz in the ground would depend on the assets of the company. For Borden, all it got was the deposit ("official" ozs just over 2 M oz for indicated and inferred, but the potential value was more like 4 Moz in-situ, hence the value widely quoted was 526/4 = $130/oz (and not 526/2 = $263/oz). On the other hands, Triangle has an "official" RE of about 2.4Moz, plus more below 800m, plus Sigma and LD and other targets. In addition, it has the mill and tailings with all permits along with the ramp (G had to build the ramp by itself later). Hence in my opinion, ICG has much more than Borden Lake...and ELD has on the table the same sort of offer ($537M vs $526M).
Although management has indicated its willingness to support ELD offer and agreed with the "penalty" of $18M (~3% penalty) if the deal is broken for a better offer, the door for other offers is left open wide enough, since a 3% penalty is nothing if there is a bidding war for ICG.
My crystal ball says, AEM (or G, or others) will not let ELD monopolize this game without a challenge. I would be reluctant to take ELD shares (too much exposure to Greece and Turkey), but I will take AEM or G shares any day ($1.5/s would be a good starting point).
Just my take. Roll your own dice, and take the consequences, lol.
GH