Earlier this month, Peak Rare Earths (ASX:PEK) received a takeover bid from Singaporean outfit Shenghe Resources that valued the company at $200 million, more or less. That was the second, improved iteration of a bid from Shenghe for the company that was better received by shareholders.
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So it was that Shenghe – which already holds 19.7% of Peak – had pitched an offer on the table for a takeover at 44.3cps. All well and good.
But since September 5, another entity – Miami-based General Innovation Capital Partners (GICP), which describes itself as “enhancing [the] western way of life” – has offered a superior offer for PEK via a Letter of Intent valued at 54.5cps.
That offer, which on purely financial terms is clearly superior, values the company at $240 million. Perhaps not the world’s most drastic of bid upgrades, but still, we have to remember forty mil is forty mil.
And so one might think the GICP offer is obviously of interest to Peak’s management and shareholders alike – but then you’ve got the underlying issue that Shenghe already holds one-fifth of the company.
And using that weight, Peak informed shareholders it’s rejecting the higher-valued GICP bid, in part, because Shenghe has notified Peak it won’t support the deal.
“The Peak Independent Board Committee has carefully assessed the Letter of Intent, with the assistance of its financial and legal advisers, as required by the terms of the Shenghe SID,” Peak wrote on Tuesday.
“Based on the information contained in the Letter of Intent, the Peak Independent Board Committee has determined that the Letter of Intent is not, and could not reasonably be considered to become, a ‘Superior Proposal’ as that term is defined in the Shenghe SID.”
Clearly, Shenghe has to be applauded for some clever manoeuvring here, at least when it comes to the art of protecting your takeover bid from competitors. But the real meat of the rejection was outlined when the company wrote:
“Shenghe has indicated that it is not willing to accept or support the proposal outlined in the Letter of Intent, such that the transaction is unlikely to be able to be completed in its current form (noting that Shenghe has voting power to ~19.7% of Peak’s ordinary issued share capital).”
While shares have climbed on Tuesday, investors weren’t universally happy – a turnaround from the good mood in the room that defined Shenghe’s second, improved offer, earlier this month.
Peak owns a rare earths project in Tanzania.
PEK last traded at 43cps.
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