Effect of merger on PEM??

  1. 35
    Posts

    Do any of the more experienced TSers have an opinion as to the effect the merger (or proposed merger) between CBH and PEM will have on the short to medium term SP of Perilya? Seems a good move strategically but not sure how the market will react to it?

    I hold some from the mid $2 mark and foolishly topped up at $1.37 thinking "it cant get any worse than this".

    Seems I was wrong!

    DK

  2. 8
    Posts

    It looks like CBH are more keen to do this deal than PEM - Jim going and CBH GM will be running the show. Punting on a 5/1 ratio as when looking at the balance sheets.

    Company Analysis Merged Group 07/08

    Zinc Production tonnes 130,000

    Lead Production tonnes 74,200

    Silver Production Ounces 2,491,164

    Average Share Price

    Cash - 31st Dec $343,600,000 (inc 1st Apil $30M

    Borrowings - 31st Dec $240,200,000 (inc equip leases

    Net BS Equity - 31st Dec $414,905,000

    Target Production 09/10 Zinc Lead Copper

    Broken Hill 110,000 65,000

    Endevour 65,000 35,000 700

    CBH - Broken Hill 30,000 25,000

    Panararma 50,000 20,000

    Merger will save the following (estimate only)

    Reduce Capex expenditure by $65-$75M - feed to go to the mill with spare capacity.

    Back office merger $10-20M benefit YOY

    Reduce Operational Costs at Broken Hill mine by about 20-30%.

    Total benefit estimate $110M YOY, which will translate into increased net earnings + Risk profile reduced

    By 09/10 merged group would be cemented in the 10 top tier of Zinc producers and top 5 for Lead Producers

    All up not a bad story could see the merged share price have a total value of $800M. Current zinc price will also hurt most producers so it estimated supply will come off as mines close Teck Corp already walking the talk!! and finally consumption forecast to increase by 3.5% YOY.

    If the market is rationale which it isn't who nows what could happen.

  3. 7
    Posts

    the CBH and PEM merger says that 3 CBH shares will give 1 PEM share and also per 9 CBH shares, 1 share in a new company (Kimberly Minerals or something).

    so, if i had 10 shares in CBH, does that mean i get 3 shares in PEM and 1 in Kimberly Minerals? or i get the choice of either 1 Kimberly Minerals share or 3 PEM shares.

    I'm assuming i get both, however i am new to the stockmarket.

    Can anyone let me know?

    Cheers

  4. 11.6k
    Posts

    The Kimberly Metals spin off will go ahead regardless of whether or not the merger with PEM is successful.

    You will receive 1 Kimberly Metals shares for every 9.2 CBH shares but these will not be listed for the interim. See the details released last thursday, specially the second last paragraph of page 2.

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