RE: RE: RE: Arb spread explainedcouple of great posts there grazer (appreciate your insight). Without primero rolled in (yet) not sure i see anyone taking a run at northgate at least at this juncture. Wiht four different banks involved on the advisory work, can certainly understand rumours running rampant right now as i'm sure all the banks are pitching a number of different scenarios.
Ultimately I think both companies need each other for reasons cited in the release. NGX needs low cost production to support a decent valuation as YD ramps up. They also get a CEO. Primero needs liquidity as well as diversification (both of which they get here). They also get a modest premium on its share price which has traded down (albeit well below instrinsic value in my opinion - but i'll take today's price over $3.00 which is where Primero was trading very recently). If anything I can see someone taking a run at Primero right now given the offer is limited to 0.60x NAV (some good upside here).
With Conway's knoweldge of doing deals and given his interests are still alligned with getting top dollar for Primero Shareholders, I think he had large hand at helping to orchestrate this transaction and has too much vested to let this fail. Any third party coming to the table at this juncture would have to be offering something that complimented what's already been done to date. I wouldn't want to envision what this would look like (will need to give this some more thought).
If someone else came in and took a run at Northgate I would have to assume they would be doing so without Conway as I can't see Conway abandoning Primero if the deal fell through. He would lose too much credibility in the market for jumping ship so early in his tenure with Primero. I'm of the opinion that Conway believes in the exploraiton upside at San Dimas and sees san dimas as a good flagship mine to leverage growth by acqusitions. This takeout by NGX is good example of what I believe he will continue to do.
Put all this together - I think between NGX and Primero, the likelihood of another offer at this point would have better chance of going to Primero over NGX. That said I think there's good case to be made that the new NGX becomes a target once they get a hold of san dimas.
As rediculous as the spread between both companies is right now, a comment from previous post helped paint the picture on the reality that Primero is considerably less liquid as does not have a US listing. I think NGX is trading up to reflect market acceptance and optimism for the company inclusive of primero and this really is a good opportunity to own NGX right now indirectly by buying Primero. The main risk is that the deal falls through but again - given Conway's track record, I see this deal moving full steam ahead.
Conclusion: Buy Primero
Most likely Case: deal goes through and opportunity now is to buy NGX shares at lower price
Best Case: Someone else makes a superior offer on Primero
Worst Case: Deal does not go through. Stuck holding Primero (with good upside potential if concensus NAV on Primero is any indication).
I'm sure there are number of other scenarios here. I'm speaking more to previous comments about rumours circulating on potential other offfers. Just dont see NGX being in play right now. I believe NGX is trading up to reflect the value behind this arrangement. Primero not participating to same extent which reflects lack of liquidity.