SQM’s agreed purchase of Azure Minerals for $1.63bn comes after months of attempts by the the Chilean lithium heavyweight, but its increasingly strong performance in the end meant it was forced to pay up.
In May, it is understood that SQM put a bid on the table at $1 per share, before increasing it to $2.31 in July, an offer that was disclosed in August.
But the news out of Azure Minerals about the prospects of its highly lucrative lithium resource just kept getting better and better.
The price at $3.52 per share, was largely in line with what was anticipated in recent days, and considered a knock out offer by any measurement at a 44.3 per cent premium to its last traded price of $2.44 per share, which already had a takeover premium baked in.
It was also a 52.4 per cent premium to SQM’s earlier $2.31 proposal made in July but disclosed in August after it was first revealed by The Australian.
Both SQM and Azure were understood to have agreed on the $3.52 per share price last week, but the stock has remained in a trading halt in recent days after the pair ironed out the finer details surrounding the takeover option structure of the transaction.
A key shareholder is the Wilhelm Zours-chaired Deutsche Balaton, which owns 10.8 per cent and frustrated Genesis Minerals’ plans to buy Dacian Gold with its major holding in that stock, and it has agreed to vote in favour of the offer.
Shareholders will vote in January on the agreed deal announced to the market on Thursday after the stock spent much of the week with the trading in its shares halted.
Chief executive Tony Rovira emphasised the cost and risk of delivering Azure Mineral’s large and highly lucrative Andover lithium project, particularly in the context of an uncertain broader economic outlook.
“As such, the board believes the transaction provides Azure shareholders with a compelling opportunity to de-risk their investment and realise certain value at an attractive premium to historical trading level,” he said in a statement to the market.
Andover, strategically located only 50km to Port Hedland, is yet to identify a mineral resource, but drilling results so far suggest it will produce a large amount of high quality lithium after a Final Investment Decision is made in the coming years.
As a consequence, SQM is moving to snap up the asset early on amid a race to secure metals used for batteries ahead of the anticipated transition to electric vehicles.
The Chilean group has a strong track record bringing such projects on stream and its Mt Holland lithium venture with Wesfarmers in Western Australia has gone well.
The buyout involves potentially the largest price paid for an asset without a resource and comes despite a recent slide in the price of lithium.
It includes an agreement where if there is an emergence of a major shareholder on the register with a blocking stake, or a vote for a buyout by way of a scheme of arrangement structure is not successful, the offer immediately defaults to a takeover structure, where SQM can gain control by amassing shares directly on market at $3.50 each.
That agreement has emerged to prevent a repeat of last week’s developments where Gina Rinehart blocked a $6.6bn buyout of Liontown Resources by the world’s largest lithium producer Albemarle after Mrs Rinehart gained a 19.9 per cent interest in the business.
Western Australia prospector Mark Creasy is the joint venture partner on the Andover project and his wife, Annie Guo, is a Azure Minerals director.
It is understood that he is yet to determine how to vote his 13.21 per cent interest in the business over the SQM offer.
Mr Creasy owns 40 per cent of the underlying Andover lithium asset that Azure Minerals is developing.
Working for SQM is investment bank Macquarie Capital while Azure Minerals is advised by Barrenjoey.
SQM owns a 19.9 per cent stake in Azure Minerals.
Sources have suggested that billionaires Mrs Rinehart and Mineral Resources boss Chris Ellison both hold shares in Azure Minerals, and before Mrs Rinehart raided Azure Minerals on Thursday, it was expected the pair would be angling for a seat at the table in the Azure deal by amassing a larger stake.
It is understood that Mr Zours has been shopping his stake to prospective buyers for some time before the latest deal was announced.
At the star of the year, Azure Minerals’ share price was 28c and its market value about $125m.
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