Interesting article in the AFR's Street Talk section...

Interesting article in the AFR's Street Talk section tonight:

"Western Areas, which has been carrying on like a company in takeover defence mode for the past month, is understood to be in the crosshairs of a deep-pocketed suitor, with fingers pointing to the acquisitive IGO Ltd as the most logical candidate. Fund managers reckon that whoever is circling Western Areas would need north of a $1 billion bid just to get in the front door, given the board’s belief in the company’s Odysseus growth project and the investor appetite for nickel and other battery metals. Should a bid materialise, it would be another blow for short-sellers, at a time when there’s plenty of smoke around long-term short targets like Western Areas, and red hot conditions for M&A. Rothschild is understood to be advising Western Areas."

Noteworthy that they've taken inbound interest seriously enough to apparently appoint a defence advisor. Currently there doesn't seem to be a non-binding or indicative offer but it does seem a potential takeover is possible given all the announcements WSA have made in the past month or so which seem to be aimed at boosting their share price (release of 10-year production guidance and stronger emphasis on New Morning/Diggers as potential development options). If a strategic was going to buy them, then now would be the time to do it, before they sign long-term off-take from Odysseus/Cosmos.

If we assume a bid at $1,000m Enterprise Value, then
Add back cash at 30 June of $151m plus $12m from the delayed shipment last quarter = +$163m. Assume they are cash flow neutral this quarter.
Add back the current value of their Panoramic shares = +$70m
Gives $1,233m equity value. Divide by 325.6m fully diluted shares (based on the last 2A release) = $3.79 per WSA share.

Even if the bid doesn't come in at around $1bn EV it would still need to be well north of the current share price for all the institutions on WSA's register to accept. According to shortman, short interest in WSA was 3.7% as of last week, and had been rising. 3.7% of 321.6m basic shares outstanding is a total short position of around 11.9m shares. WSA's average trading volume over the last five days was 1.44m shares/day. That's over 8 days to cover at 100% of average daily volume. Hope the shorts can cover in time as this could be painful for them.