RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:hypothetical RCG+ANX merger A hypothetical RCG+ANX merger.
Summary
The math assumes that the merged company raises $13.8M of cash with a third party (3PT) to pay-off and restructure debts. Under the hood, RCG component is restructured such that the ANX & RCG components have the same equity/asset ratios. The merged company will have a $13.8M liability with the third party (3PT).
after the merger
assets $89.2M
liabilities $33.0
shareholder equity $56.0M
156.19M shares including 36.19M new ANX shares
35.9c per ANX share
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A)
starting point
ANX Dec 2018
total assets $57.9
liabilities $14.8
shareholder equity $43.1M
RCG Dec 31 2018
total assets $31.3
liabilities $18.3
shareholder equity $13.0M
key ratios from ANX
share price = 43.1/120= $0.359/sh
ratio of equity/assets = 43/57.9 = 0.743
B)
a simple merger would look like this
total assets $89.2
liabilities $33.1
shareholder equity $56.1M
C)
ANX has twice the assets/ounces as RCG (see note 1)
120M ANX
+ 60M RCG
= 180M shares
D)
RCG brings $13M of shareholder equity to the table.
If the RCG component was restructured along the same equity/assets lines as ANX it would be ..
13/0.74 = 17.5
RCG adjusted assets $17.5
liabilities $4.5
shareholder equity $13.0M
E)
the remaining assets, $13.8, are allocated to third parties (3PT) and entirely as debt
ANX 57.9
RCG 17.5
3PT 13.8
Total 89.2
F)
60M of shares would be divided between RCG and the third parties based on ANX share price of 0.359c
RCG 13/0.359 = 36.19M shares
3PT 60-36.28 = 23.81M shares (placeholder, not allocated to equity)
G)
completed balance sheet is ..
Name assets liab equity
ANX 57.9 14.9 43.0
RCG 17.5 4.5 13.0
3PT 13.8 13.8 0.0
Tot 89.2 33.2 56.0
shares
ANX 120.0
RCG 36.19
Total 156.19
where shares = equity/0.358
H)
Summary
assets $89.2M
liabilities $33.2
shareholder equity $56.0M
156.19M shares
35.9c per ANX share, or
7.42 per RCG share, or
4.83:1
If a merger happened there might be are a number of other RCG debt holders that might prefer shares over cash. Those shareholders could convert their shares at book value.
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notes:
1)
A RCG ANX merger would increase the amount of gold held
ANX by roughly 50%. This already reflected in the assets on the balance sheets of the two companies. The value of the assets are already priced in.
Specifically the increase in ANX ounces would be ...
Indicated 46%
Inferred 87%
Total uncapped 64%
2)
Other considerations...
ANX has active mining operations (important cash flow)
ANX has experienced management in place (not on the balance sheet)
RCG has 20M of tax credits (off-balance sheet item)
I assume these items are a wash in a merger.
all other items are already baked into the balance sheets
3)
actual shares
RCG 174.8M
ANX 118.8M
4)
Balance sheets
RCG Dec 31 2018
balance sheet $31.3
liabilities $18.3
shareholder equity $13.0M
ANX Dec 2018
balance sheet $57.9
liabilities $14.9
shareholder equity $43.0M
ANX has $14.9M or 26% of liabilities.
5)
The numbers are from the balance sheets as of Dec 31 2018. There is no haircut of assets values in this hypothetical merger.
The company might decide to use lower values for the RCG assets in the merged balance sheet, but difference would result in goodwill line item. The total assets would not change.
6)
Precision of the numbers.
Three digit numbers are used to help track the numbers in the text.
Two digits is probably close enough in practice.
eg.
share price = $0.359/sh
ratio of equity/assets = 0.743