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Gold/Mining/Energy : Canadian REITS, Trusts & Dividend Stocks

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To: Lorne Larson who wrote (954)	5/7/2001 10:08:27 AM
From: Lorne Larson	Read Replies (2) of 11633

Has anyone else noticed or played the discount given to the target company in almost all of the recent acquisitions by the oil and gas trusts. The latest is NCf/Magin. NCF has offered $5.86 in cash or .896 units of NCF for each Magin share (the .896 translates into $5.69 at todays NCF price of $6.35). You could buy Magin for as low as $5.28 on Friday. The same sort of discount was available on SHN/Ionic, PWI/Cypress, and PVE/Maxx. Bit of a discount still available on VKR/BXL. I've played just about all of these and made some nice money on all of them. For example got MXP at $6.37, it's now trading at around $7.10, and I expect it to be at $7.30 by the time the deal closes. If you hold and accept the trust shares in trade, you'll also make some money because they usually drop until the acquisition is closed and than start rising again after the deal closes (as per PWI). Also if you want you can short the trust when the deal is announced. I've stayed away from this, but I've now started immediately selling any trust units I hold immediately the deal is announced, and using the proceeds to buy the target. Some of the brokerages have jumped on these plays bigtime, CIBC on the PWI/Cypress deal being the best example. I assume this discount is there for 3 reasons. First many owners of these junior oil and gases either do not want to hold or are not allowed to hold (mutual fund) a royalty trust and therefore dump as soon as the deal is announced. Secondly there is a possibility the takeover will not be approved. Thirdly by buying the target you miss out on the next monthly dividend of the trust. The first reason is irrelevant to people like those on this forum; the 2nd reason is generally pretty remote because the takeovers are almost always friendly; and the last reason is often not true. The Cypress shareholders participated in the PWI dividend during the takeover month - likewise with MXP shareholders participating in the PVE dividend for this month. Playing these things has been almost too easy. Initially I was very concerned because I thought I must be missing something. However it works like a damn. You may wish to have a look at this type of play when the next takeover is announced.

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