Your professor owns shares of Stillwater Mining Company (NYSE: SWC)
which is engaged in the development, extraction, processing and
refining of palladium, platinum and associated metals or platinum
group metals (PGMs) from a geological formation in southern Montana.
Norilsk Nickel, a Russian PGM mining company and 51% shareholder in
SWC has made a tender offer to purchase 4,350,000 additional SWC
common shares for $7.50 per share. The tender offer expires at 12:00
midnight on August, 19 2003. If successful, Norilsk would own 56% of
the outstanding shares of SWC. Go to Stillwater’s homepage at

http://www.stillwatermining.com/Home/HTML/Main.html and follow the
links to investor relations and then to SEC filings. Obtain a copy of
Schedule 14D-9 filed on 7/22/2003. This document details the terms of
the tender offer. Answer the following questions.
a.	As of 1:30 pm on 8/5/2003, SWC was trading at $5.52 per share. Is
this a rational price given that Norilsk is offering $7.50 per share?
Explain.
b.	Should I tender my shares into the offer?

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Clarification of Question by snowbear-ga on 07 Aug 2003 05:43 PDT

I want to clarify the shares outstanding information for Stillwater
Mining available on the web.There are 89,627,853 shares outstanding
total, but Norilsk already owns 45,463,222 of those shares.In
addition, around 28,000,000 shares are held by institutions, many of
which are not likely to tender their shares (especially index funds).
So effectively, the float is around 16,000,000 shares.

Snowbear --

This is an interesting area of SEC regulations, as this offer is for
4.35 million shares -- less than 5% of the outstanding common stock. 
As such, it's called a "mini tender" by the Securities & Exchange
Commission.  There are two documents on the SEC site that detail the
issues with mini-tenders.  Note that mini tenders are exempt from many
traditional rules governing tender offers:
SEC
"Mini Tender Offers" (Feb. 12, 2001)
http://www.sec.gov/answers/miniten.htm

"Mini Tender Offers: Tips for Investors" (July 27, 2000)
http://www.sec.gov/investor/pubs/minitend.htm

An offer such as this, for $2 above market value, might be expected to
cause the stock to rise to above $7, as arbitrageurs would look to buy
anything below that and impute their carrying costs (interest costs)
for the period until they'd expect Norimet's payment to arrive.

However, this mini tender doesn't indicate how Norimet will choose
whose shares are purchased.  As you've pointed out, there are 16
million shares in float -- and Norimet is clearly limited to
purchasing only 4.35 million of those.  The company could chose to do
so in several different ways:
* on  a pro-rata basis
* on the basis of when tenders were received (by date)
* on a random basis

As such, it's difficult to predict whether your shares will be
purchased or how they'll be purchased.   And even the Stillwater
Mining 14K-9 statement says (p. 3) that "Norimet my modify the terms
of the Offer, but may not increase or decrease the number of Shares
sought."

So, uncertainty means that share prices don't rise to the full value
of Norimet's tender.

Google search strategy:
"tender offers" + over-subscription

If any part of this answer is unclear, please request a clarification
before rating it.


Best regards,

Omnivorous-GA