Battery minerals, Commodities, Finance, News, Nickel

IGO comes to the party, increases Western Areas bid


IGO has amended its proposal to acquire Western Areas (WSA), recognising the nickel landscape has changed since the offer was first announced in December 2021.

The miner has increased its bid from $3.36 per share to $3.87 per share, with nickel prices spiking since the initial announcement and Western Areas enjoying improved performance as a result.

“Since first announcing the initial scheme in late 2021, we have observed continued strong nickel price performance and the subsequent impact on valuations of companies operating within the sector,” IGO managing director and chief executive officer Peter Bradford said.

“Notwithstanding our view that the recent extreme trading and volatility in the nickel market will be short-term in nature, IGO recognises these higher prices have resulted in stronger financial performance from WSA compared to IGO’s assumptions at the time the initial scheme was announced in December 2021.”

After initially encouraging its shareholders to vote in favour of IGO’s acquisition, after the nickel market destabilised in early March, Western Areas consulted its independent financial advisor KPMG to investigate the implications on the scheme.

On April 4, KPMG produced a revised draft report (having already completed an initial report) which considered the effects of the price volatility.

Based on prevailing market conditions as at March 24, the IER (independent expert’s report) found the initial proposal to be “neither fair nor reasonable to Western Areas shareholders”.

Western Areas proceeded to withdraw its recommendation for its shareholders to vote in favour of the scheme. The company then consulted with IGO about the potential of an amended proposal.

This led to the increased scheme consideration of $3.87, which IGO says will be its final offer, in the absence of any superior proposal.

“The Western Areas board is pleased to have negotiated an agreement with IGO considering the recent volatility in the nickel price and the positive impact this has had on Western Areas cashflow position and fundamental asset value since the initial scheme was announced on December 16, 2021,” Western Areas chair Ian Macliver said.

“Forrestania is capturing the upside in near-and-medium-term nickel prices, while Odysseus is positioned to capitalise on the longer-term nickel price driven by growth in electric vehicles.”

Western Areas’ Forrestania mine in Western Australia is considered one of the country’s highest-grade nickel mines, while the Odysseus mine (located within Western Areas’ Cosmos nickel operation) is the company’s mine of the future.

The revised offer of $3.87 per share represents a 56 per cent premium to Western Areas’ share price of $2.48 on August 18, 2021, a day prior to when Western Areas announced it was in preliminary discussions with IGO about a potential transaction.

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