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“PAC-MAN” Phase In Gold Continues
30 days ago I wrote that the “PAC-MAN” Phase as I coined the phrase, or consolidation phase was upon us in the gold sector. Breaking news just hit that GoldCorp has announced it acquired Andean Resources for $3.6 billion. Those who understand this phase will make fortunes taking positions in companies that will be acquired during this phase. For seasoned professionals who grasp this, it will be like printing money or having their own personal ATM machine...
September 3, 2010
Goldcorp Enhances Gold Production Pipeline With Acquisition Of Andean Resources
September 2, 2010 – Vancouver, BC – Goldcorp Inc. (“Goldcorp”) (NYSE:GG, TSX:G) and Andean Resources Limited (“Andean”) (TSX and ASX: AND) today announced an agreement whereby Goldcorp will acquire, through a scheme of arrangement under Australian law (“the Arrangement”), all of the outstanding shares of Andean. The total consideration for the purchase of 100% of the fully diluted shares of Andean is approximately C$3.6 billion.
I wrote in the previous “PAC-MAN” piece from 30 days ago that the “cheap” way to buy into some of the mid-size and large cap names was to purchase companies that were to be acquired. I stated they would, “be marked up and then receive a premium above the market as they are acquired.” Here is a chart of Andean Resources showing the markup towards the $5 area, keep in mind the deal that was just announced is for $6.50/share (the premium), a nice score for investors:
I also wrote in the previous piece, “As is the case in Kinross, the acquiring company briefly moves lower and consolidates, but then moves higher along with the rest of the market.” Here is the chart confirming that is precisely what has happened with Kinross, note the gap down at the beginning of the chart the day after the acquisition was announced, followed by the consolidation and then the move higher:
Again, for professionals who understand this “PAC-MAN” phase, they will benefit with an outperformance versus their peers. For all of you fund managers out there, that is the goal isn’t it?
To read the previous piece Gold Takeovers - “PAC-MAN” Phase Upon Us CLICK HERE.
To read the original “PAC-MAN” piece from 6 1/2 years ago CLICK HERE.
Eric King
