Cobalt 27 has entered a definitive scheme implementation agreement with Highlands Pacific in an attempt to take over the company.
While Cobalt 27 already owns 13 percent of Highlands, the company is now offering AU$0.105 per share in Highlands to acquire the rest, valuing the total offer at approximately AU$115 million.
However, the offer price will rise to AU$0.115 a piece if the closing spot price of nickel climbs above US$13,220 per tonne before December 31, 2019 over a consecutive 5-day trading period.
The scheme will need to receive approval from 75 percent of Highlands shareholders at a shareholder meeting expected to take place in mid to late April. Additionally, the Papua New Guinea (PNG) National Court will need to give approval.
According to a statement from Highlands, the company’s largest shareholders — which collectively represent over 30 percent of Highlands shares — have expressed their intent to vote in favor of the takeover. The shareholders include Lim Advisors (9.4 percent), Tribeca Investment Partners (8.9 percent) and PanAust Limited (11.8 percent).
Highlands and Cobalt 27 had previously been trying to extend a cobalt-nickel streaming agreement that the companies signed into in May 2018. However, due to complications in meeting the agreement’s conditions, Cobalt 27 decided to decline the extension. Highlands now views the takeover offer as the next best option.
“Having considered all available options, the independent directors of Highlands have concluded that the scheme represents the nearest and most certain outcome for shareholders in that it offers value certainty at a significant premium to recent share prices,” the statement read.
The current offer for Highlands shares from Cobalt 27 represents a 43.8 percent premium over the former’s closing price on December 24, 2018, which was AU$0.073 cents.
According to Cobalt 27, Highlands’ key asset is its 8.56 percent interest in the Ramu nickel-cobalt mine near Madang, PNG. After repayment of construction and development loans, Highlands’ stake in Ramu would increase to 11.3 percent.
“The acquisition of Highlands will allow Cobalt 27 to gain a direct interest in the Ramu nickel-cobalt mine and materially increase its attributable exposure to the mine’s nickel production from 27.5 percent to 100 percent and cobalt production from 55 percent to 100 percent, relative to the previously announced Ramu cobalt nickel stream,” Cobalt 27 chairman and CEO Anthony Milewski said in a statement.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.