Mineral Deposits (MDL) chairman Nic Limb has responded negatively to Eramet’s unsolicited offer to acquire MDL for $287.5 million at $1.46/share, calling the offer “grossly inadequate” and urging shareholders to reject it.
Mineral Deposits is an ASX-listed mineral sands miner focused on Senegal; it is responsible for the Grande Côte operation (GCO), the world’s largest single dredge mineral sands operation with a mine life up to 2050.
French miner Eramet, which owns 13.3 per cent of MDL — 8 per cent prior to the takeover announcement plus a recent pre-bid acceptance deal of 5.3 per cent with shareholder Ellerston Capital — first announced its intention to purchase MDL in late April.
The announcement saw Mineral Deposits’ share price jump 27 per cent to $1.47, one cent over Eramet’s offer price.
In addition, Eramet holds a 50 per cent joint venture (JV) interest with MDL at their other major project apart from GCO, the TiZir titanium-iron ilmenite upgrading facility in Norway, in operation since 1986.
Eramet’s offer price represents a premium on MDL’s share price prior to the announcement of 26 per cent on its last closing price of $1.16 and 33 per cent on its one-month volume weighted average price (VWAP) of $1.10.
In a statement released to the ASX, MDL advised that “until MDL’s directors have issued their recommendations regarding the offer and MDL shareholders are in receipt of the target’s statement, MDL shareholders are urged to take no action in relation to Eramet’s offer”.
Some of the reasons cited for the disapproval include that it would deprive MDL shareholders of the full value of the investment; that the offer does not reflect peer market valuations and premiums paid to shareholders in comparable takeovers; that it does not take into account TiZir’s near-record high production and growth potential; that MDL has received verbal and written support from key shareholders; and that Eramet has provided only “the bare minimum information” about the deal, especially given its status as JV partner at TiZir.
The aforementioned key shareholder support includes comment from Tim Roberston of Farjoy, who said that Eramet’s offer was “highly opportunistic given that the target is emerging from a period of high but abnormal costs that have constrained financial performance over each of the past four quarters. Those problems have now been overcome, but [MDL] has never traded in the clear, so to speak.”
Simon Mawhinney of Allan Gray said that he valued MDL’s management and that “a situation where a transaction doesn’t proceed is perfectly acceptable”.
Gabriel Radzyminski of Sandon Capital added that the “offer was substantially below replacement cost of the joint venture’s capital equipment.”
MDL is expected to release its official target’s statement in response to Eramet soon.