Potential Merger : Alacer Gold

Attention gold miners with a spare 1.86 billion Australian dollars (US$1.95 billion) handy. Macquarie analyst Mitch Ryan reckons you could spend it on a takeover ofAlacer Gold Corp. ASR.T +3.67%.

“We believe that Alacer is becoming an increasingly interesting target for a potential takeover, our rationale being an acquirer can pay a reasonable premium to recent share prices, assume zero value for Australian assets and still be in the black for the prize Turkish assets,” he said in a note to clients.

Under such a scenario, the broker believes an acquirer could pay between A$6.50 and A$7.00 to gain control, which would value Alacer between A$1.86 billion and A$2 billion.

Mr. Ryan, who described Alacer’s portfolio of assets as Jekyll and Hyde, notes that the company’s Australian operations could face a 50% write down, hamstrung by a high-cost environment.

He thinks Alacer’s review of its Australian business unit could result in the divestment of some or all of its assets – currently carried at US$1.2 billion. But he notes any write down would be unlikely to cause balance sheet pressure or restrict Alacer’s ability to pay dividends.

Macquarie believes that any potential suitors won’t rush a deal out, choosing instead to wait until the first quarter of 2013 or for the outcome of the Australian business review and the bankable feasibility study for its 80%-owned Copler Sulfides project in Turkey.

Macquarie has an Outperform recommendation and a price target of A$6.20 a share on Alacer which last traded at A$4.55 a share. The stock has fallen 54.7% in the year to date, making it the worst-performing gold stock in the S&P/ASX200.

excerpt above taken from WSJ.