Western Areas (WSA) has now won a suspension in trading in its shares till next Wednesday after asking the move at the end of a two-day trading halt that left investors no clearer as to the fate of IGO’s $1.1 billion all cash takeover offer that seemed to be done and dusted.
IGO had offered $3.36 a share for WSA and won support from major shareholders, Perpetual (14.7%) and Andrew Forrest’s Wyloo Metals (9.8%) – the latter as late as February this year.
And up till Tuesday it looked like a done deal but IGO told the ASX (after Western Areas had asked for a trading halt) that it understood the halt was linked to the belief the independent expert had come down against the offer.
Western Areas yesterday did confirm that the independent expert hired to assess the bid had decided it would not be fair and reasonable for WSA shareholders.
“…the Company has received a draft Independent Expert’s Report from its appointed Independent Expert, KPMG Financial Advisory Services (Australia) Pty Ltd). The Company confirms that the draft Independent Expert’s Report from KPMG contains a draft opinion that the proposed Scheme is not fair and not reasonable and therefore is not in the best interest of Western Areas shareholders.
“Having regard to the opinion of the Independent Expert and the requirements of the Scheme, the Western Areas Board has determined to withdraw its recommendation that Western Areas shareholders (other than Excluded Shareholders) vote in favour of the Scheme.
Western Areas said that in accordance with the agreement, “the parties have now commenced a limited period of consultation regarding the Scheme.”
“The purpose of this consultation process is to provide an opportunity for IGO to present a revised proposal, that Western Areas considers is in the best interests of Western Areas shareholders.
“There can be no assurance whether any revised proposal will eventuate or, if it does, what the terms and conditions of any such transaction might involve. It is possible that the SID will be terminated and that a scheme of arrangement will not proceed.”
IGO has made it clear that it is not for lifting its price, even though nickel prices have risen sharply since late 2021 due to the Russian invasion of Ukraine (Russia produces 10% of the world’s nickel) and the volatility in the price of the metal after a trading debacle blew up the world price and trading on the London metal Exchange.
IGO’s attitude was best described by its comment in its ASX release on Tuesday “despite recent volatility in the nickel price, IGO’s long-term view on the nickel price has not materially changed.”
So by next Wednesday that view, if still held will kill the bid unless IGO changes its mind.
Here’s something for IGO to keep in mind.
Its shares lost 3% yesterday to $13.91. On Monday, the day before news leaked of the thumbs down from WSA’s independent expert the shares ended at $14.98 (a record close). That takes the loss of more than $1 a share, or more than $660 million in value in just four days.
Adding 35 cents a share to the WSA offer price would cost around $180 million and offer a good chance to reclaim the lost value.
There seems to be a bit of a price disconnect here because investors clearly like the idea of IGO buying Western Areas.
