Duluth Metals (DM.TO) has announced last month that it entered into an agreement with Antofagasta (LON:ANTO) whereby Antofagasta made an offer to acquire all shares of Duluth it didn’t already own. Antofagasta was quite keen to get its hands on the Twin Metals deposit in the USA as its offer included a 543% premium compared to the previous closing price of the Duluth shares.
However, as the offered price is C$0.45/share, an interesting trading possibility has opened up as the current share price of Duluth is still trading below the offer made by Antofagasta. This usually means that the market isn’t expecting a counter-offer from another party and that it’s expecting some problems to get the deal closed for some reason. If you feel like the Antofagasta-Duluth deal will effectively go ahead, buying the shares at C$0.44 (or lower as Duluth was trading as low as C$0.41 just a few weeks ago) and tendering them into the Antofagasta offer might be an interesting investment for a certain 2.3% gain. This obviously only works if A) the deal goes through and B) your broker fees are relatively low.
Disclosure: The author holds a long position in Duluth Metals and will tender his shares into the Antofagasta offer. Please see our disclaimer for current positions.