Q: Today SSL agreed to a takeover by Royal Gold in an all share transaction representing a 20% premium at some previous date. What is you opion on this offer. Thanks Mike
5i Research Answer:
We would consider it an OK, but not great deal. RGLD shares are expensive, so it makes sense to use them as currency. It's a friendly deal, but not at a huge premium, and some SSL shareholders might have preferred cash. RGLD shares are up 23% this year. Corporately, the deal makes snese for RGLD and SSL will get a higher dividend (nearly double). SSL shares are up 84% in the past year so shareholders are probably still happy even at a lower than average control premium. SSL holders will end up with about 23% of the combined company. We would hold SSL shares for now. The chance of another party coming in are low, but not zero.