LONDON (Alliance News) – Bacanora Minerals Ltd on Friday issued a strong rebuttal against an unsolicited offer from its shareholder, partner and fellow London-listed peer Rare Earth Minerals PLC, stating it "strongly rejects" the offer as it "significantly undervalues" the business.
Bacanora operates and is developing the Sonora lithium project in Mexico and Rare Earth holds large interests in some of the concessions within the project area, alongside a 19.8% stake in Bacanora at a corporate level after upping it earlier this year.
Bacanora on Friday said it has recieved an unsolicited, non-binding, indicative proposal from Rare Earth that aims to merge the two companies through a reverse takeover of the company by Rare Earth, which wants to then issue shares in the company to Bacanora shareholders.
Bacanora said the merger exchange ratio that has been proposed is between 135 and 141 shares in Rare Earth for each share currently held in Bacanora.
"The board of Bacanora strongly rejects the Proposal believing it significantly undervalues the company and jeopardises Sonora's development path to production," said Bacanora.
In more detail, the midpoint of the proposed offer from Rare Earth represents a premium of 13% to the closing share price of Bacanora on Thursday and when compared to the weighted average of Bacanora shares in the past six months then the midpoint offer actually represents a 0.7% discount.
Bacanora also pointed out that 84% of production from the huige Sonora project is expected to come from concessions that Rare Earth holds no interest in. Bacanora also said Rare Earth, as an existing shareholder, voted against its plans to re-domicile the company in the UK.
"The proposed offer is opportunistic and materially undervalues Sonora. The Bacanora team has made excellent progress in successfully de-risking and advancing Sonora, and at the same time has successfully raised capital from blue chip institutions, who are fully supportive of progress made to date and management's ability to deliver Sonora as the world's next major lithium mine," said James Leahy, interim chairman of Bacanora.
"In our view, as well as undervaluing the company, the proposed offer has the potential to impede the project's development going forward," he added.
Rare Earth had not released a statement concerning the offer on Friday morning.
Bacanora shares were up 7.3% to 95.0 pence per share on Friday morning and shares are up 29% since the start of the year, yet the current price is lower than the price paid by Rare Earth earlier this year to increase its stake in Bacanora of 100.0 pence.
Rare Earth shares were up 2.8% to 0.745 pence per share on Friday morning.
By Joshua Warner; [email protected]; @JoshAlliance
Original Article: http://www.morningstar.co.uk/uk/news/AN_1475219382117927700/bacanora-rejects-takeover-bid-from-partner-and-shareholder-rare-earth-(alliss).aspx
