Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

[vtc]

Got an ticker alert that GTU was up 3%.  Wasn't sure if gold was up or the NAV discount was just reverting to the mean.  Check gold graphs not much action. Then check the news and see:
http://finance.yahoo.com/news/sprott-in ... 00525.html

[dragoncar]

My question is... why


edit: oh http://www.theglobeandmail.com/report-o ... e24072589/

[LazyInvestor]

I don't get this

[dragoncar]

I don't get this

Basically, PHYS intends to buy GTU, in which case you'll just end up shares of PHYS.  This is a good deal for PHYS since GTU trades at a discount.

[LazyInvestor]

Thanks for clarification. I like GTU. It's nice to buy at discount. Hope PHYS behaves similarly.

[Pointedstick]

Thanks for clarification. I like GTU. It's nice to buy at discount. Hope PHYS behaves similarly.

It doesn't; it has physical redemption provisions for high rollers.

Seems weird that all of the sudden everyone wants to take over GTU.

[l82start]

Thanks for clarification. I like GTU. It's nice to buy at discount. Hope PHYS behaves similarly.

It doesn't; it has physical redemption provisions for high rollers.

Seems weird that all of the sudden everyone wants to take over GTU.

i was thinking the same, it has a sharks circling feel to it.
it would be a shame i like GTU the way it is..

[Pet Hog]

Basically, PHYS intends to buy GTU, in which case you'll just end up shares of PHYS.  This is a good deal for PHYS since GTU trades at a discount.

Correct me if I am wrong, but it looks like PHYS is going to buy GTU at its NAV, so there should be no discount for PHYS.  They'll be buying all of GTU's physical gold at its market rate.  So not a particularly good deal for PHYS in that regard, but a 7–8% bonus for GTU holders.  I'm having a good day, which can't always be said as a GTU fan!

[dragoncar]

Basically, PHYS intends to buy GTU, in which case you'll just end up shares of PHYS.  This is a good deal for PHYS since GTU trades at a discount.

Correct me if I am wrong, but it looks like PHYS is going to buy GTU at its NAV, so there should be no discount for PHYS.  They'll be buying all of GTU's physical gold at its market rate.  So not a particularly good deal for PHYS in that regard, but a 7–8% bonus for GTU holders.  I'm having a good day, which can't always be said as a GTU fan!

You may be right, since they say "NAV to NAV basis" but I don't really know what that means.  Maybe it means they will offer to exchange PHYS for GTU on a 90% NAV to 100% NAV basis.  They haven't made a legal offer either way so it's talk and speculation at this point.

Seems weird that all of the sudden everyone wants to take over GTU.

i was thinking the same, it has a sharks circling feel to it.

Part of me thinks this is just a play to kill off the Polar proposal and then Sprott's announcement just never amounts to anything.

[Pet Hog]

You may be right, since they say "NAV to NAV basis" but I don't really know what that means.  Maybe it means they will offer to exchange PHYS for GTU on a 90% NAV to 100% NAV basis.  They haven't made a legal offer either way so it's talk and speculation at this point.

My understanding comes from this line in vtc's Yahoo link:

Based on the relative trading values to NAV of the Sprott Physical Trusts, the proposed exchange offer would unlock US$3.33 per unit for Central GoldTrust unitholders.

The $3.33 number is exactly equal to the NAV discount reported yesterday by GTU: NAV of $43.90 and market closing price of $40.57.  So, in my mind, that means PHYS would have payed $43.90/share if they had done this deal yesterday.  But bearing in mind this line:

GTU units are trading at a -7.6% discount to NAV, while Sprott Physical Gold Trust units are trading at a -0.37% discount to NAV, based on closing prices on April 22, 2015 on the NYSE MKT and NYSE Arca, respectively.

I'm not exactly sure what the NAV-to-NAV basis would imply: a discount of 7.60% or 7.23%?  Hypothetically, if PHYS were also trading at a 7.6% discount, then there would be no bonus for GTU holders.  Therefore, I'll guess that the real discount is 7.23%, so the bonus to GTU holders will be about 7.8% [going from 0.924 ( 1 – 0.076) to 0.9963 (1 – 0.0037)].

[steve]

These are all good reasons to own and control your own bullion, I like GTU the way it is and hope for no change, I liked it for a portion of gold holding because of convenience, the tax advantages and the way it always worked great for the PP.

[Libertarian666]

I like GTU the way it is too, but there is a lot of money out there trying to take advantage of the discount.
So this makes GTU even more of a "no-brainer" as long as it is trading at a significant discount, since eventually someone is going to buy it and eliminate the discount, which should result in "free money" for the existing unitholders!

[Pet Hog]

Some movement on the Sprott/Goldtrust front...

Sprott Formally Launches Offers to Central GoldTrust and Silver Bullion Trust Unitholders

The number of Sprott Physical Gold Trust units to be distributed to each Central GoldTrust unitholder will be determined on a NAV to NAV basis. For example, based on the NAV per unit of Sprott Physical Gold Trust US$9.98 and Central GoldTrust US$44.36 on May 22, 2015, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer.

[Libertarian666]

I'll miss GTU, but I won't mind making a few extra percent on the trade. 

[buddtholomew]

What happens if they choose not to follow through and the discount widens further?

Crazier things have happened.

[Libertarian666]

What happens if they choose not to follow through and the discount widens further?

Crazier things have happened.

Since I'm still accumulating, I'm not too worried about that.
However, if the discount gets wide enough, one of these takeover attempts will succeed.
The trustee nominees from the activist group got 43% support (http://www.newswire.ca/en/story/1529691 ... lation=org), so it wouldn't take much more dissatisfaction among the unitholders to overturn their stewardship, for better or worse.

[steve]

I spoke with a Sprott representative earlier today and he could not give me one concrete reason that a take over would benefit me in the long run. We had a lengthily conversation as he wanted to know all my objections. I explained how I liked the lower expense, the fact that it trades at a big discount when gold is out of favor and I am a buyer, My opinion also is that when I am a seller which would be at a time when gold is in favor the potential for GTU to trade at a much bigger premium then Sprott which would be closer to the NAV.  GTU has traded with very high premiums in the past when gold was in favor. I was told that Sprott has intentions to let smaller unit holders redeem for gold , but as I told him intentions mean nothing nothing to me as it is not the case at present and may never be the case.  We discussed the two offers "The exchange offer alternative (the "Exchange Offer Election") and a merger (the "Merger Transaction") alternative (the "Merger Election"). He could not really give me the information that I requested, but was promised that he would get back to me. These are my questions from a US investor prospective who filed the QEF election, Situation 1 , there is an overall loss at the present time, Situation 2 there is an overall gain at present,  which option would be better, what paperwork needs to be filed and if an individual has holding in an IRA and a taxable account can one do the merger with one and the exchange offer with the other?

[vtc]

Sprott set up a website about the offer: http://sprottadvantage.com/

[Pointedstick]

Sprott set up a website about the offer: http://sprottadvantage.com/

Most of those supposed advantages don't actually seem like advantages to me...

[Mike59]

Per some of my other posts I've averaged into GTU quite nicely during the discount (I recall some days below 10% from NAV), I'm hoping this doesn't go through...

If it goes through or hits NAV before the deal I'm considering selling the GTU and moving to CEF. I figure the nice 7% or so gain I've made by buying low can be recycled and dumped into CEF, which is currently around -8% from NAV, let's do it again! I've always had a thing for silver anyway.... I'm sure the PP purists would strongly advise against this 

Vote NO! 

[vtc]

Got a call yesterday from Sprott asking if I'm aware of the offer, and confirming my address.

Also today got a message from my brokerage:

Our records indicate that you hold CENTRAL GOLDTRUST PERPET shares in your account ending in [...]. This security is subject to a(n) Exchange Offer which requires your decision. Please go to [...] to read the terms of the offer and submit your instructions or call [...] for information on the terms of the offer.

[vtc]

108 page PDF about the offer
http://sprottadvantage.com/media/1007/g ... ooklet.pdf

[MachineGhost]

What a bunch of B.S..  GTU has traded at a premium.  It sounds just like an excuse for Sprott to increase their gold reserves at a discount.

And GTU management themselves can buy back the shares to narrow/eliminate the discount.  Happens all the time.

[Libertarian666]

Maybe I'm not fully understanding this tender offer vs the Polar takeover, but what would be the downside to doing the NAV to NAV swap to Sprott, selling the shares to capture the gain, and then repurchasing GTU later if the whole trust doesn't get taken over?

Nothing, assuming that your transaction doesn't tip over the result to having GTU be taken over when it wouldn't otherwise.
That's a pretty small risk for most unit-holders.

[Libertarian666]

By the way, I have been informed of the exchange offer by Fidelity. There is a 100+ page document about it, which I'm not going to read right away...