Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Stillwater Mining Company's Stock Is Soaring Today

By Matthew DiLallo - Dec 9, 2016 at 1:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The platinum and palladium miner agreed to be acquired by Sibanye Gold.

Image source: Getty Images.

What happened

Shares of Stillwater Mining Company (SWC) soared on Friday and were up more than 18% by 12:30 p.m. EST. Driving the rally was the announcement that the platinum and palladium miner agreed to an acquisition offer by South African miner Sibanye Gold (SBSW -0.98%).

So what

Sibanye Gold is offering $18 per share in cash for Stillwater Mining, which is a 25% premium to the company's average trading price over the past month. The offer values the company at $2.2 billion and would hand over control of the only U.S. primary producer of platinum and palladium to the South African gold company.

For Sibanye Gold, the deal is about diversifying not only beyond its namesake commodity but outside of its home country. It also marks the company's third large deal over the past 15 months that will position it to become the world's third largest producer of palladium, an essential metal for catalytic converters used in automotive exhaust systems as well as being a critical component in fuel cells.

Sibanye Gold has already secured financing for the transaction as well as the support of its largest investors, which makes this deal more likely to go through. That leads the company to believe that it can close the acquisition in the second quarter of next year.

Now what

Given that this is an all-cash deal at a hefty premium, it is less likely that Stillwater will draw a higher bid. Moreover, given today's rise in the stock price to roughly $17.50 per share, there's not much more upside left for those holding on. Because of that, investors should consider cashing in and investing their windfall in a stock that has more upside.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Stillwater Mining Company Stock Quote
Stillwater Mining Company
Sibanye Stillwater Limited Stock Quote
Sibanye Stillwater Limited
$10.55 (-0.98%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.