Pershing Gold (PGLC) – Merger Arbitrage – 6% Upside

Current Price – $1.13

Merger Consideration – $1.20

Upside – 6.3%

Expiration Date – February 2019 (expected)

Merger Announcement and Presentation

 

This is a straightforward nano cap mining merger that got slightly delayed only because of government shutdown and should take no longer than a month to close.

Pershing Gold is being acquired by Americas Silver in an all stock deal. Merger consideration is 0.715 shares of USAS per PGLC share. Current spread stands at 6.3%. USAS borrow is available at 8% per annum and will likely consume up to 1% of the upside.

Shareholder approvals from both companies have been received on the 9th of January leaving CFIUS approval the only major condition to be outstanding. Due to acquirer being a Canadian company as well small size of the transaction, there shouldn’t be any problem in passing it.

Initially the closing was expected by the 14th of January, but due to government shutdown it got delayed:

Possible CFIUS Approval Delay

As a condition of the Merger Agreement between Americas Silver and Pershing Gold, the Transaction must obtain necessary approval from the Committee on Foreign Investment in the United States (“CFIUS”).  Americas Silver and Pershing Gold jointly filed the required notice with CFIUS on November 21, 2018 with the applicable 45-day review period commencing on November 29, 2018.

On December 22, 2018, the Company received notification from CFIUS that all deadlines for declarations and transactions under review or investigation are tolled due to the lapse in appropriations attributable to the partial U.S. government shutdown.  As a result, the closing of the Transaction, previously estimated to be on or about January 14, 2019, may be extended until appropriations are restored and a subsequent approval is obtained from CFIUS or the parties waive this condition.  The Company continues to monitor the status of the shutdown and its impact on the closing of the Transaction and will provide updates as necessary.

Thus after the government reopens it should not take more than a month to get the CFIUS approval and close this transaction.

PGLC liquidity is limited ($80k average daily volume), bid/ask spreads are usually around 2-3 cents and daily volatility is high, therefore careful hedged position opening is required to capture full upside from this transaction.