Two weeks ago, Sprott Asset Management announced a $900 million hostile bid for Canada’s Central GoldTrust (GTU) and Silver Bullion Trust (SBT-UN.TO, SVRZF). Sprott has similar products: Sprott Physical Gold Trust (PHYS) and Sprott Physical Silver Trust (PHS-U.TO, PSLV). Buying the competition makes sense, but the hostile move was a surprise. Why? Why now?
Rick Rule explains why in this interview. He thinks Sprott can reduce the discount at which GTU and SBT trade. The interview is short and sharp, informative and… fun.
What strikes us about this deal is that if Sprott wins, it will consolidate a big chunk of the physical-bullion-holding part of the precious metals market. If it loses, everyone in the space will still see how the Sprott products enjoy a much smaller discount. Win or lose, the bid is a great ad campaign.
Win-win for Sprott.
Look for PHYS and PHS to dominate going forward.