Sprott Said Planning Unsolicited Bid for Canadian Metals Trusts

by Scott Deveau, Bloomberg Sprott Asset Management LP is planning to make an unsolicited offer to acquire Central GoldTrust and Silver Bullion Trust valued at $800 million, a person with knowledge of the matter said. An offer at that level would reflect a 3.5 percent discount to the combined market value of the trusts at the close Wednesday of about $829 million. The proposal could come as early as Thursday, said the person, who asked not to be identified because the information is private. The trusts, which buy and hold substantially all of their assets in respective metals in bullion and certificates, have been under pressure from investor Polar Securities Inc., the Toronto-based hedge fund. Polar has been urging the trusts to change how unitholders can redeem their investment as a means of closing their trading gaps. Sprott aims to use its broader marketing platform and investor relations expertise to close the historic trading gap on both targets between their unit price and their net asset value, said the person familiar with the situation. Sprott projects it will add about $3.14 per unit in value to Central GoldTrust and 95 cents a unit to Silver Bullion by closing that gap, the person said. J.C. Stefan Spicer, president and chief executive of both Central GoldTrust and Silver Bullion, declined to comment. Glen Williams, a spokesman for Sprott, declined to comment. Trading Discount Under the terms of the bid, Sprott would exchange units of its own trusts, Sprott Physical Gold Trust and Sprott Physical Silver Trust, for units of Central GoldTrust and Silver Bullion, the person said. The offers will happen simultaneously and be conditional on the approval of both companies’ unitholders and other conditions, according to the person. Central GoldTrust’s units are trading at a discount to net asset value, or NAV, of 7.6 percent, according to data compiled by Bloomberg. Sprott Physical Gold Trust units are trading at a 0.4 percent discount to NAV. Silver Bullion Trust units are trading at a 10.9 percent discount to NAV, while Sprott Physical Silver Trust units are trading at a 0.98 premium to NAV, the data compiled by Bloomberg show. Polar Securities owns about 5.7 percent of Central GoldTrust, the data show, and holds more than 10 percent of Silver Bullion. It has been advocating that both companies change their redemption features to allow their holders to either redeem the physical metal, minus certain standard costs, or cash at 95 percent of its NAV. Currently, they receive the lesser of 90 percent of the 10-day volume weighted average price or the closing price. In February, Polar Securities called for a special meeting for unitholders of Silver Bullion to vote on the proposal and submitted its position to the unitholders of Central GoldTrust. ISS recommended on April 16 that GoldTrust holders vote against Polar’s proposal. “Overall, the short-term and opportunistic nature of the dissident proposal constitutes a cause of concern for long-term unitholders,” ISS said in a statement.

Sharing is caring!