Stealing NES.V for $76M at current TMM share price vs $134M.When this deal was announced in February, TMM was $1.28 and NES was $0.96. The deal calls for an exchange of NES shares for TMM shares at a rate of NES:TMM x0.9. That meant that a $0.96 share of NES was valued at 0.9 x a TMM share or $1.28 = $1.15 which was a nice 20% premium given that NES shares were $0.96 that day.
There are 117M NES shares so the total deal was worth $1.15 x 117M = $134.55M on February 13, 2015.
Today, a $0.65 NES share is worth .9 x $0.73 or $.66 which is a $.01 premium over todays closing price and it values the deal at $.66 x 117M = $77.22M.
What that means is that we are stealing NES for almost a 50% discount. Why NES is allowing this is beyond me. If I were them, I would cancel the deal. For TMM shareholders, it's a steal and it will be made up once people appreciate what is happening here. Essentially, we just got a $134M deal for $77M. And if the share price keeps dropping...then it'll be even cheaper.
Perhaps the brokerage firm backing the deal is shorting. It would not be the first time that something like that has happened. It's called a "death spiral deal" and there's a reason why it's named that because it's deadly for shareholders of NES.
So...either way...I am good with it. TMM won't cancel the deal. NES might. If they do, then it's easier for us to raise capital and there's less overall dilution and we get $5.5M. However, if they don't, then we have almost 50% less dilution than at the beginning of the deal and we steal NES for 50% off the going rate two months ago.
Great deal for us. Not so good for NES.
The NES loan terms:
The Debenture will mature on the date that is the earlier of: (i) the closing of the arrangement (the “Arrangement”) contemplated by the Arrangement Agreement (the “Arrangement Agreement”) dated February 16, 2015 between the Company and Timmins Gold Corp. (“Timmins”); and (ii) August 31, 2015 (the “Maturity Date”).
TMM and NES Agreement terms:
Under the terms of the Arrangement, Newstrike shareholders will receive 0.9 (the “Exchange Ratio”) of a Timmins Gold common share (a “Timmins Gold Share”) and C$0.0001 in cash for each Newstrike common share (a “Newstrike Share”), representing the equivalent of C$1.15 per Newstrike Share and a premium of 20.0% based on the closing prices of the Timmins Gold Shares on the Toronto Stock Exchange (“TSX”) and the Newstrike Shares on the TSX Venture Exchange (“TSX-V”) on February 13, 2015, and C$1.20 per Newstrike Share and a premium of 22.4% based on the 20-day volume-weightedaverage-price (“VWAP”) of the Timmins Gold Shares on the TSX and the Newstrike Shares on the TSX-V as of February 13, 2015. The Exchange Ratio implies a total transaction value of approximately C$140 million on a fully-diluted in the money basis. In addition, each outstanding option to purchase a Newstrike Share will be exchanged for an option to purchase a Timmins Gold Share, based upon the Exchange Ratio.
TMM and NES termination clause:
The Arrangement Agreement includes a reciprocal non-solicitation covenant, the right of either Newstrike or Timmins Gold to accept a superior proposal in certain circumstances, with each party having a 5 business day right to match any such superior proposal for the other party. The Arrangement Agreement also provides for the payment by each of Newstrike and Timmins Gold of a C$5.5 million termination fee if the Arrangement is terminated in certain specified circumstances.
Read more at https://www.stockhouse.com/companies/bullboard/t.tmm/timmins-gold-corp#FMukrWWVC1VhQlLt.99