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From Russia with Love Comes an Odd Merger that Might Just Work

By Malcolm Stacey | Thursday 5 July 2018

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello, Share Polishers. It was about 2 years ago that my brilliant friend Gary Newman suggested I might buy shares in Ovoca Gold (OVG). I was a bit worried that it was based in Russia, which doesn't always attract Western investors. But a Gary tip is a Gary tip and so I went ahead.

For a year the usual penny share malaise set in and the share eroded. But then it picked up and I was even for a few months. This week, however, has seen a 35% rise on a day.

The reason for the hike is a surprising acquisition by Ovoca. Depending on shareholder approval, it’s ‘conditionally’ agreed to buy 59.9% of a small pharma company developing a drug for treating ‘female sexual dysfunctions’. It’s called Libicore. And the name of the pharma company is IVIX, another Russian outfit.

They do say that the best mergers are by companies doing roughly the same thing. But what does gold mining have to do with medical treatment? Couldn't be more different, really. However, the market seemed to like the idea - though the huge surge in share price later cooled off somewhat. Instead of Ovoca Gold, the idea is to change the name of the company to Avoca Bio - that’s how different things could be. Later, the company plans to dispose of all its mining activities.

In 2014, it suspended a big gold mine operation in Russia because of ‘volatility’ in the gold market. Since then it’s been trying to find a profitable outlet for its ‘strong balance sheet’. And it seems that IVIX might fit the bill.

Who knows how well this venture might pan out. But I am now up 35% on Gary’s original tip. And so I’ll keep my holding to see what happens. It takes management courage to switch from one kind of endeavour to a completely different one. And I always applaud corporate bravery. As long as it's not reckless. And I rather think this merger is not.

See you in the Punter’s Return?

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