Abitibi Royalties (RZZ.V) – Merger Arbitrage – 17% Upside

Current Price: C$25.65

Offer Price: C$29.88

Upside: 17%

Expected Closing: Q4 2021

Presentation and press release

 

Less than two weeks after we successfully closed the Ely Gold merger arbitrage case, Gold Royalty announced two more similar acquisitions - Abitibi Royalties and Golden Valley. Both transactions are a "package deal" as Abitibi is a SpinCo of Golden Valley and the parent still owns a 45% stake in Abitibi.  Quick idea on Golden Valley's takeover is posted here.

On the 6th of September, Gold Royalty entered into a definitive agreement to buy Canadian precious metals royalties peer Abitibi Royalties in exchange for 4.6119 GROY shares. The buyer seems credible and highly interested in Abitibi's core assets - royalties in Canadian Malartic Mine (largest open pit mine in Canada). The offer is unlikely to be withdrawn amidst GROY's accelerating acquisition spree. This takeover is conditioned on Abitibi's shareholders’ approval (2/3rds votes cast), which is very likely to pass with 65% of shareholders supporting the deal. In addition, a majority of minority shareholders' vote will be needed. What constitutes minority shares (i.e. is 11% owned by management included) is not clear yet - more details will be provided in the upcoming proxy. Regulatory hurdles are unlikely as this is a small domestic deal. The meeting is set for the 29th of October with closing expected shortly after. 200k+ shortable shares are available at a 24% annual rate on IB. Downside to the pre-announcement price stands at 18%.

Major shareholders:

  • Golden Valley Mines -45%;
  • Rob McEwen - 11%;
  • Board/Management - 11%;
  • Richardson Wealth Clients - 6%;
  • La Caisse Depot - 5%.

Further info on GROY and its targets can be found on Golden Valley merger arbitrage write-up.

1 COMMENT

  1. snowball

    What’s the relation of Rob McEwen with RZZ and GROY?

    As founder of Goldcorp, he must be a mentor to David A Garofalo (GROY’s CEO, and former CEO at Goldcorp), and may have other business connections with Garofalo/GROY, which may lead to his shares excluded from RZZ minority vote.

    VAL-D’OR, QUÉBEC–(Marketwired – June 2, 2016) – Abitibi Royalties Inc. (TSX VENTURE:RZZ) (“Abitibi Royalties” or the “Company”) is pleased to announce that Rob McEwen, the Company’s second largest shareholder, founder of Goldcorp Inc. and current Chairman/Chief Owner of McEwen Mining Inc., has agreed to purchase, indirectly, through a company wholly owned by him, 439,084 shares of the Company by way of a private transaction with certain directors of the Company for approximately CDN$2.3 million. The share purchases will increase Rob McEwen’s ownership to 12.3% from 8.7% of the Company’s outstanding shares and will build on an earlier CDN$2 million investment in 2014.

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