Atlatsa Resources (listed in Canada and South Africa) is a merger arb trade which should yield between 7.5% and 16% within 3 months. Unfortunate it’s only for small accounts.
MERGER ARB CALCULATION
Atlatsa is trading at 93c in South Africa. The plan is to take the minorities private at 100c a share. This implies a return of 7.5%
Atlatsa trades at 8c in Canada. Using the current CADZAR exchange rate (c$10.72) investors will be taken private at 9.3c a share. This implies a return of 16.5%
Atlatsa Resources owns a dormant platinum mine (Bokoni) and an exploration project (Kwanda) in South Africa.
Atlatsa’s major shareholders are Anglo Platinum (22.5%) and Atlatsa Holdings (62%).
TAKE PRIVATE DETAILS
On December 12, 2018 Anglo Platinum offered to buy Kwanda from Atlatsa for $27.5mil.
To avoid expensive listing costs in South Africa and Canada it was decided to buy back the minorities for ZAR100c
The conditions of the transaction include
·Approval by South African Department of Mineral Resources. (The approval was received on December 12, 2018.)
·Approval by the exchange control authorities. (I originally thought this was a formality, but, it has taken much longer than I originally thought. I have been in contact with Atlatsa and have been told that the approval is at “an advanced stage” and I don’t expect this to be a problem.)
·Approval from the Supreme Court of British Columbia. (An administrative formaility)
·Shareholder vote 30 days after posting the circular. (Given the precarious nature of Atlatsa the vote should be a formality)
Given the “advanced nature” of the exchange control approval I expect the transaction to be completed within two to three months.
I am not concerned that this deal will not happen as planned.
I do not hold a position with the issuer such as employment, directorship, or consultancy. I and/or others I advise do not hold a material investment in the issuer's securities.