Red 5 (RED) and Silver Lake Resources (SLR) have announced a merger of equals, that will be completed via a Scheme of Arrangement. Under the terms of the Scheme, SLR shareholders will receive 3.434 RED shares for each SLR share held, which will result in SLR shareholders owning 48.3% of the merged entity, with RED shareholders retaining 51.7%. We believe the transaction is value neutral to RED, with our merged entity valuation in line with our A$0.40 price target. We retain our BUY rating on RED, noting that the potential exists for other suitors to emerge now that the merger has been announced.
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