The stock market had a nice bounce last week, giving investors a bit of reassurance during a tough 2022. However, even after a three-day holiday, traders on Wall Street didn’t seem to be in a good mood, leaving market indexes mixed heading into Tuesday’s market open. As of 8 a.m. ET, futures on the Dow Jones Industrial Average (DJINDICES: ^DJI) were down 179 points to 32,979. S&P 500 (SNPINDEX: ^GSPC) futures had fallen 19 points to 4,137, but Nasdaq Composite (NASDAQINDEX: ^IXIC) futures managed to pick up a single point to reach 12,679.
The first day of the trading week often has news from companies announcing mergers over the weekend. The two candidates this time around both deal in natural resources, showing the appetite for real assets in the investment community. Read on to find out why Yamana Gold (NYSE: AUY) and CatchMark Timber Trust (NYSE: CTT) are moving sharply higher Tuesday morning.
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A golden deal
Shares of Yamana Gold were up 16% in premarket trading Tuesday morning. The gold mining stock got an offer from an industry peer that has shareholders excited about the future.
Yamana and Gold Fields (NYSE: GFI) announced that they had come to an agreement to merge. Under the terms of the deal, Yamana shareholders will receive six-tenths of a share of Gold Fields for each Yamana share they own, with no cash changing hands. Based on the average prices of the two stocks over the past 10 days, the arrangement prices Yamana shares at a roughly 34% premium to where they’d traded before the merger announcement.
Gold Fields and Yamana believe that combining forces will help them maximize growth opportunities while also making the most of their current assets and remaining committed to environment, social, and governance principles. Yamana’s mines and development projects across the Americas are generally in jurisdictions that are friendly to the mining industry, and the company also has a pipeline of exploration projects that’s attractive to Gold Fields.
As is typical in all-stock transactions, Gold Fields stock fell sharply, losing 10% of its value in premarket trading. However, the merger announcement sends a signal to the entire precious metals mining industry that further consolidation could be near.
Catching CatchMark
Shares of CatchMark Timber Trust got an even bigger boost in premarket trading, soaring more than 35%. The timber real estate investment trust also found itself the takeover target of an industry peer.
CatchMark and PotlatchDeltic (NASDAQ: PCH) announced early Tuesday that they had come to an agreement to combine forces. Similarly to Yamana and Gold Fields, PotlatchDeltic made its offer as an all-stock deal, with CatchMark shareholders to receive 0.23 shares of PotlatchDeltic stock per CatchMark share. The implied price is a 55% premium to CatchMark’s closing share price from last Friday.
For PotlatchDeltic, the acquisition will further diversify its holdings. CatchMark has interests in about 350,000 acres of timberland in the Southern U.S., while PotlatchDeltic has a larger and broader portfolio that spans not only the South but also northern states including Minnesota and Idaho. With so much home construction across the Sun Belt, adding to holdings in key areas like Alabama, South Carolina, and Georgia should pay immediate dividends for PotlatchDeltic.
Again as a result of the all-stock structuring of the deal, PotlatchDeltic shares were down 8% in premarket trading. However, with valuations in timber stocks at very low levels, the combination makes a lot of sense for both companies and could be a long-term winner for shareholders who stay the course.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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