GBG - Gindalbie Metals

[AussiePaul72]

Where is the premium for SDL holders?? GBG closed today at 1.365 whereas SDL closed at 0.805. I am expecting SDL to keep going up and GBG to stagnate that leaves very little premium available for 1 GBG vs 2 SDL deal.
I can't see why this deal is of interest to shareholders?
Just my opinion.

I think you mean that GBG closed at 1.635. You do raise a good point though in that at the end of today's trading the premium available to SDL shareholders has been virtually nullified now with SP movement after trading commenced with 2 SDL shares currently valued at 1.61 and GBG closing at 1.635. I am a holder of both SDL and GBG and have been thinking of the implications all afternoon.
Someone please correct me if i am wrong but until the merger actually takes place i would think that the SDL SP could be restricted by the SP of GBG. I'm not complaining as this merger is probably a large part of the reason that the SDL share price has surged recently. I think that the merged company has a lot to offer and still has many upsides on resource size.
If the SP of GBG & SDL stay roughly in the 1:2 current ratio, there is no advantage in investing in either company in my opinion. However, if the SP moves away from the 1:2 ratio over the coming months then there would be an advantage in investing in one over the other.
However IMHO i think the GBG & SDL will stay relatively closely aligned in a 1:2 ratio. Am i right in my assumptions?

 

[EZZA]

i can see that there are synergies of the two companies together. also confused with gbg going down as opposed to sdl going up.

Where is the value then, is sdl better value than gbg? thought gbg was the pick of the bunch. in this scenario sdl coming out on top. some clarification would be great.

do sdl holders get one free gbg stock for every 2 sdl shares.

what about gbg stocks, do we get 2 sdl stocks for every one gbg? don't think this is case, do we just lose out in the short term?

 

[golfmos123]

What a day.

I was also thinking of some tax issues as well - if the merger goes ahead, then people (like me) who have bought into SDL in the last say 6 mths are also going to face a larger tax bill than if we were going to be long term SDL investors and hold our shares for 12 mths. I guess it is somewhat like the RIN takeover where once the shares were cancelled, if it was inside the 12 mth time period, you pay full CGT like it or not.

Somehow I feel like I just lost a lot of money.......(yes I know I also made a fair bit as well).

Come to think about it, the government just made a lot of money as well with the CGT coming into play on a $1 billion company being merged.

 

[imaginator]

On completion of the merger, the new entity would have approximately 1.43 billion shares on issue with an estimated market capitalization of approximately A$2.4 billion based on the closing price of Gindalbie shares on 21 September of $1.70. Gindalbie securityholders would hold approximately 35% and Sundance securityholders approximately 65% of the merged company.

Does this mean GBG holders lose out?
Since SDL will hold 65% compared to GBG at 35%.

Is it better to buy SDL stocks now?

 

[springhill]

Does this mean GBG holders lose out?
Since SDL will hold 65% compared to GBG at 35%.

Is it better to buy SDL stocks now?

At the end of the day when the merger take place it wont matter a hoot which you own as long as the share prices are on parity, imaginator. Once they merge GBG and SDL shareholders as a seperate entity will cease to exist, we will be one team pulling in the same direction, so to speak. If everyone races out buying SDL shares, this will force share $$ up, now if GBG does move at same rate you will actually be doing yourself a disservice, as your 2 SDL shares will be worth MORE than 1 GBG, effectivly making u a 'loss'. Either that or the market will crrect SDL back down and u will still be out of pocket. All good buying SDL just dont pay over the odds.
This is how I read it

 

[serendip]

Assuming the merger goes through as currently planned (which looks almost certain, given the expressed support of major shareholders), then, from this point on, it does not matter whether we buy GBG or SDL. They will be moving in lock step, with Gindalbie remaining at almost exactly twice the price per share of Sundance, and this situation will remain until the new GBG shares are issued, replacing SDL shares.

Any new announcements, whether they be about Lodestone or Mbalam or anything else, will simply affect the share prices in that same proportion.

 

[nikki]

I was also thinking of some tax issues as well - if the merger goes ahead, then people (like me) who have bought into SDL in the last say 6 mths are also going to face a larger tax bill than if we were going to be long term SDL investors and hold our shares for 12 mths. I guess it is somewhat like the RIN takeover where once the shares were cancelled, if it was inside the 12 mth time period, you pay full CGT like it or not.

you are right. i totally forgot that side of the equation. so, gbg shareholders are better off because they keep their shares, do not have to declare a gain and pay full CGT, etc. etc. i got screwed again???? the same thing happened to me when i bought rights that IBA health gave me. those rights were all profit and therefore had to pay CGT on the purchase price of the rights?????

 

[ADoyle]

you are right. i totally forgot that side of the equation. so, gbg shareholders are better off because they keep their shares, do not have to declare a gain and pay full CGT, etc. etc. i got screwed again???? the same thing happened to me when i bought rights that IBA health gave me. those rights were all profit and therefore had to pay CGT on the purchase price of the rights?????

This is why SDL shareholders are going to receive such a premium price for their shares.
In price average terms over the past couple of months SDL shareholders should've needed to convert to GBG at least at 3 for 1. Instead now having been given 2 for 1 the run up in price sorts out any net imbalance.

 

[wipz]

you are right. i totally forgot that side of the equation. so, gbg shareholders are better off because they keep their shares, do not have to declare a gain and pay full CGT, etc. etc. i got screwed again???? the same thing happened to me when i bought rights that IBA health gave me. those rights were all profit and therefore had to pay CGT on the purchase price of the rights?????

Perhaps you should consult a professional tax practitioner, but the way i see it is that the transfer of ownership for SDL holders to GBG is simply a scrip-for-scrip roll over and no CGT event occurs?

 

[GoHardHomie]

CGT Tax relief

From what i've seen in previous situations a CGT tax event does not neccessarily happen in a takeover.
It'll be discussed in the detail of the offer documentation.
When Paladin took out Summit there was no taxable event until you actually 'sold' your shares.
Cheers

 

[imaginator]

Hey guys,

When will we see GBG rise again?

After the takeover, it was 1.6. then yesterday 1.51. Today 1.48. What's happening ?

I DO HOPE there is a SUPPORT LINE somewhere.

 

[s3081402]

Hey guys,

When will we see GBG rise again?

After the takeover, it was 1.6. then yesterday 1.51. Today 1.48. What's happening ?

I DO HOPE there is a SUPPORT LINE somewhere.

Yeah they are selling GBG to buy SDL. The 2 to 1 ratio is the worst ever. It should be 3 to 1 and GBG would be around $1.80 by now.

 

[dj_420]

i agree with that.

shareholders should vote improve the offer for SDL, GBG are the ones who start production next year.

definately should be 1 for 3. i suppose half of the directors dont care because they have vested interest in both companies!

 

[imaginator]

News from GBG's Malaysian counterpart.

Tuesday September 25, 2007


Melewar associate in African mining deal
<span class="story_byline"><b>By KATHY FONG</b>

PETALING JAYA: Melewar Industrial Group Bhd's mining business will reach African shores soon via the merger between its associate company Gindalbie Metals Ltd and Sundance Resources Ltd.

Australian-based Gindalbie announced yesterday it had made an offer to take over Sundance, which has an iron ore project in Cameroon, western Africa, through issue of one Gindalbie share for every two existing Sundance shares.

The deal valued Sundance, which is also an Australian miner, at A$1.6bil – 15% premium over last Friday's closing price of 74 cents, said the statement jointly issued by both companies.

It said the merger would create an international iron ore company that would have a market capitalisation of about A$2.4bil (RM7.14bil) based on Gindalbie's last closing price of A$1.70.

Chairman of the two companies George Jones, who is also shareholder, has expressed his full support for the transaction.

He told a conference call yesterday that Gindalbie's two biggest shareholders, Melewar Steel Venture Ltd (wholly-owned subsidiary of Melewar Industrial) and Anshan Iron & Steel Group Corp of China, were expected to support the deal as well, said Bloomberg.

Jones was quoted as saying the African project (owned by Sundance) would reduce Gindalbie's reliance on its Karara development in Western Australia, where expansion might be constrained by any delays to the development of a new A$2bil port to service proposed mines in the state's mid-west.

Melewar holds 74.08 million shares, or 14.6%, in Gindalbie, which is listed on the Australian Stock Exchange. The Malaysian shareholder's equity interest is expected to dilute to about 5.2% after the merger.

Buying into Gindalbie has been proven a wise move given that Melewar's investment value has ballooned 17 times since 2004. The value of the stake is now about A$125.9mil (RM372mil).

The hefty gain on the investment is buoyed by the rising prices of iron ore – the main raw material for steel – due mainly to the strong demand from China.

Melewar's share price dropped one sen to RM1.56 yesterday with 1.03 million shares traded. The stock soared to a high of RM1.76 in June.

TA Securities analyst Kamarul-zaman Hassan said the substantial gain on Melewar's investment in Gindalbie helped to boost the group's valuation on Bursa Malaysia.

Gindalbie will only start contributing to Melewar's earnings next year. “The contribution in the first two years is expected to be minimal,” Kamarulzaman said, adding that the group had the financial capacity to explore more acquisition opportunities abroad to enhance its earnings base.

Melewar also owns 70% interest in Siam Power Generation Co Ltd, which owns and operates a power plant in Rayong, Thailand.

 

[s3081402]

i agree with that.

shareholders should vote improve the offer for SDL, GBG are the ones who start production next year.

definately should be 1 for 3. i suppose half of the directors dont care because they have vested interest in both companies!

So how does voting work. Does it come down to the board or the shareholders. 2 to 1 no way. I have a feeling the merge might not go through. What does everyone think.

 

[dj_420]

So how does voting work. Does it come down to the board or the shareholders. 2 to 1 no way. I have a feeling the merge might not go through. What does everyone think.

it would have to come down to a vote

i personally think they should improve the offer for GBG holders

i will email company and find out process

 

[Da Cat]

I am actually quite happy with the proposed merger.
SDL is a company that I have been interested in for a while (was waiting for a lull in the recent rise to jump on board, but it never came). The relative short term income to be generated from GBG will no doubt benefit SDL's further resource definition and development.
The question for me is when to buy some more - and which one?

 

[s3081402]

I am actually quite happy with the proposed merger.
SDL is a company that I have been interested in for a while (was waiting for a lull in the recent rise to jump on board, but it never came). The relative short term income to be generated from GBG will no doubt benefit SDL's further resource definition and development.
The question for me is when to buy some more - and which one?

Jump on GBG da Cat. This morning was a good time to buy. Went down $1.47. U wont see that more often. Cheers.

 

[springhill]

Yeah they are selling GBG to buy SDL. The 2 to 1 ratio is the worst ever. It should be 3 to 1 and GBG would be around $1.80 by now.

What an absolute pile of tripe, u GBG holders should get over how great your resource is, check out page 7 of the shareholders meeting, kinda puts things in perspective hey? U may be lucky its only 2:1 Hope this works!!

 

[Surly]

I just got back from the shareholder meeting and I am still in two minds about it all.

I know that doesn't help but it does mirror the general sentiment being expressed here.

cheers
Surly