Here's something you don't see too often: an acquirer's share price spiking after a proposed takeover. (Look at Equinox Minerals for proof.) And if there is a pop, it typically benefits the other company's shareholders because the target is being picked up for a big premium.
But it is indeed the case for 5N Plus Inc. , which started the week with the announcement that it is purchasing privately held MCP Group SA, a Belgium-based producer and distributor of metals and chemicals. 5N's stock is now up 17 per cent in just two days.
Investors like the deal because it offers diversification, in terms of both geography and materials offered, according to CIBC analyst Ian Tharp. MCP has good reach into China, something that 5N lacks, and the deal will make the combined entity the leading producer in the markets for Bismuth and Gallium.
Plus, the deal will reduce 5N's dependence on First Solar, which has historically accounted for between 65 and 85 per cent of 5N's annual revenues, according to M Partners analyst John Safrance. First Solar is expected to comprise 10-to-12 per cent of the combined company's revenues.
Over all, the deal holds true to 5N's promise to stir up growth through level-headed acquisitions.
5N Plus is paying total consideration of about $316-million for the company made up of cash, a vendor promissory note and shares. Going forward MCP's three shareholders and 5N Plus CEO Jacques L'Écuyer will hold about 48 per cent of the combined company's shares, which leaves a 52 per cent public float.
5N Plus develops metals and compounds used for electronic and solar applications. National Bank Financial and Heenan Blaikie advised on the takeover.
**This post has been update. We initially noted that MCP's three shareholders will hold 48 per cent of the combined company. MCP's three shareholderes plus 5N's CEO will hold that amount.