Filo (TSX: FIL) shares powered higher this week as the company announced it would be acquired in a joint venture. BHP and Lundin Mining announced it would be buying the company for $4.5 billion.
In return, shares surged by up to 10% after the news – all ahead of earnings from all three companies. So, what’s so good about Filo stock? And is it still a buy for investors ahead of acquisition approval?
Why Filo
First, let’s get into why Filo stock has been so interesting to BHP and Lundin in the first place. Both companies are currently aiming to expand on a global scale, driven by the increasing demand for copper. Filo owns several attractive assets that would give these companies a significant increase in size and potential.
In fact, for Lundin, the Josemaria project combined with Filo’s Filo del Sol project would consolidate key assets in South America. The acquisition will also benefit from recent legislation passed in Argentina, supporting mining projects that are entering into development.
And, of course, overall this enhances both companies’ market position. It will diversify the asset base and operations for both companies, while reducing project-specific risks. This will create a larger market profile, while also making the companies more resilient.
The details
So let’s get into whether an investment in Filo still offers value. As mentioned both stocks are buying in a 50/50 acquisition for $4.5 billion. Filo shareholders will be bought out at $33 per share, which was a 32.2% premium over the 30-day moving average before July 11, 2024.
Again, the deal still needs the stamp of approval. But it looks likely. Especially with a continued move around the globe to consolidate as well as expand copper projects that are essential for the clean energy transition.
The deal is expected to close in early 2025. So investors have about that long to see if shares rise further, as the company’s share price is still below the $33 per share amount.
Bottom line
Shares of Filo stock may be up, but as long as they remain below that $33 per share price, you can still gain a huge win. While we’re still waiting on approval, it looks likely. And that could mean investors can gain access to major returns in the near future. In fact, analysts agree, not just for an investment in Filo stock, but in BHP and Lundin stock as well.
So, given the current trading price of $32 and the acquisition offer of $33 per share, there appears to be immediate upside potential for Filo shareholders. The strategic benefits of the joint venture with BHP and Lundin, coupled with the increasing demand for copper, present a compelling case for investment. However, investors should consider the potential risks and uncertainties associated with the deal completion and inherent volatility in the mining sector.
Yet if you are comfortable with the associated risks and have a positive outlook on the copper market, buying Filo stock at $32 could be a good opportunity to capitalize on the expected acquisition premium and long-term growth potential of its projects. So certainly consider adding it to your watchlist today.
