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IGO lifts offer for Western Areas after days of talks to salvage $1b-plus takeover deal

Daniel NewellThe West Australian
Mon, 11 April 2022 8:50AM
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Daniel Newell


Underground miner in Western Areas mine. Credit: Supplied

IGO has been forced to up its offer to keep alive hopes of securing takeover target Western Areas after the friendly tie-up was derailed by an independent expert’s report.

The two companies emerged from days of talks on Monday to reveal they had agreed a higher cash offer of $3.87 a share, up just over 15 per cent from an initial $3.36-a-share. The new bid values Western Areas at just over $1.26 billion.

The offer represents a 6 per cent premium to Western Areas’ last traded price on April 4 before its shares were placed in a halt.

Western Areas chairman Ian Macliver said the board had unanimously recommended to shareholders that they approved the revised scheme.

“The board is pleased to have negotiated an agreement with IGO considering the recent volatility in the nickel price and the positive impact this has had on Western Areas cashflow position and fundamental asset value since the initial scheme was announced on December 16, 2021,” Mr Macliver said.

The deal was left on the brink of collapse early last week when KPMG, which had been appointed by Western Areas to rubber stamp the union, amended a draft report from January which had declared it fair and reasonable to say it was no longer in the best interests of shareholders.

IGO had initially said its $3.36-a-share offer was based on its long term view of nickel market fundamentals and pricing.
But that market was plunged into chaos last month and trade of the commodity on the London Metal Exchange had to be suspended because of a classic short squeeze that sent prices soaring.

The initial rise in price was prompted by Russia’s invasion of Ukraine which led to a range of sanctions against the pariah state, one of the world’s biggest producers of nickel.

The price spike forced Chinese nickel player Tsingshan to move quickly to cover a series of short bets it had made that the nickel price would fall.

Mr Macliver said on Monday the company’s high-grade, low-cost Forrestania operation was capturing the upside in near and medium-term nickel prices, while its long-life Odysseus project under development near Leinster was positioned to capitalise on the longer-term nickel price driven by growth in electric vehicles.

The time table for IGO’s offer has been extended until July 31.

IGO’s shares were up 3.6 per cent at 9.10am to $14.17.