An interesting Mergermarket article today. Looks like the...

An interesting Mergermarket article today. Looks like the capital raising may be off, and the board is shopping the company. It would be great if the board actually announced that it had taken these actions rather than the poor excuse for an announcement that was released yesterday.

Discovery Metals shifts focus to seek whole-of-business transaction

Discovery Metals [DML:AU] is said to be opening a data room for a number of groups, as it shifts its focus towards a whole-of-business transaction rather than an equity raise.

A number of groups are believed to be interested in a potential deal and options that could be considered include a sale of the company or the sale of a significant stake to an investor.

Cathay Fortune Corporation (CFC), which recently bid AUD 1.70 per share for Discovery, had denounced the company for considering a capital raising and publicly refused to participate. At the time, it said that it would be willing to consider a new cash offer for the company were the capital raising not to proceed.

CFC’s AUD 1.70 offer was via a takeover bid, which means that it would be unable to launch an offer at a lower price before 15 June – four months from the date its last bid closed. However, it would be possible for CFC to propose a new cash offer that would open after this date, or alternatively pursue a scheme of arrangement recommended by the target board. CFC has previously criticized the Discovery board and described its relationship with the Australian company as tense.

A China-based CFC source claimed that its former bidding partner, China Africa Development Fund, was no longer involved, but that financier China Development Bank (CDB) was still supportive. CDB had financed CFC’s purchase of a stake in Discovery and it remains the largest shareholder on the company’s register with roughly 13%. Since CFC purchased the Discovery stake at well above AUD 1 per share, Discovery has seen its shares sharply sold off.

They last traded at AUD 0.34.

The company entered a trading halt on 19 April ahead of a possible equity raise before being suspended as discussions “continued with a number of potential investors and with the company’s banking syndicate”.

by Mike Ross in Sydney, Yumin Wang and Lisha Zhou in Shanghai

Target: Discovery Metals Limited
Financial advisor: UBS AG
Lawyer: GRT Lawyers
Bidder: China Africa Development Fund [??????] , Cathay Fortune Corp. [????????]
Financial advisor: Citigroup Global Corporate & Investment Banking Group
Lawyer: King & Wood Mallesons [???????]
Issuer: Discovery Metals Limited
Proprietary Intelligence
> 500m (USD)
312 m USD (market cap)
100%
Strong evidence
Australia M&A Intelligence