Silver Lake Resources (SLR) and RED 5 (RED) 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 retain our HOLD rating on SLR, noting that why the merger has unanimous support from both SLR and RED Boards, the potential exists for other suitors to emerge now that the merger has been announced. We believe the emergence of a third party would more likely target RED, which could see SLR’s overall share of the merged entity decline if a higher offer for RED needed to be matched.
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