Q: I have a substantial position in this company, and they have just been acquired by CDE. It is trading below the implied value and CDE has dropped considerably. Which I own as well. Any suggestions on what to do here? Many thanks!
5i Research Answer:
We think the merger makes sense to create a larger, more diversified mining company. However, it is a very large deal, and all stock, so there has been pressure on CDE shares. Also, some invesors liked the silver aspect of CDE, and this deal reduces its silver exposure (on a percentage basis). With the deal, an investor owning both will of course see their position size increase in CDE. We think shares are worth holding, but would take weighting into account here for risk management. But we continue to like the sector and we expect the merged company to do quite well over time. In addiition to other merits the deal is accretive to CDE.