Mineral Deposits Limited
ERAMET’s Takeover offer: Mineral Deposits Limited’s (ASX: MDL) stock skyrocketed 26.7% on April 27, 2018 after the company received an off-market takeover offer from ERAMET. ERAMET has proposed for an off-market takeover offer to acquire all of the issued shares in MDL that it does not already own for an Offer Price of A$1.46 cash per share. The offer is based on an all-cash transaction that values the equity of MDL (on a fully diluted basis) at approximately A$291 million. ERAMET and MDL each hold a 50% interest in the TiZir joint venture, that operates integrated mineral sands (titanium dioxide and zircon) business in Senegal and Norway. As per the offer, ERAMET has acquired a relevant interest of 13.3% in MDL from some of the largest MDL shareholders. This offer is a compelling opportunity for MDL shareholders to realise certainty of value. Further, the offer price is an attractive 33% premium to the one-month Volume Weighted Average Price of A$1.10 per MDL share. The Offer Price also represents a premium of 248% to MDL’s capital raising price of 42 cents per share in March 2017. Moreover, there is limited conditionality in the offer with no funding or due diligence conditions. Additionally, the Offer provides MDL shareholders with cash certainty compared to the uncertainty of remaining an MDL shareholder, as there is volatility of mineral sands markets, TiZir has high financial leverage and MDL has limited trading liquidity. Therefore, the offer enables the full consolidation of the TiZir mineral sands joint venture within ERAMET’s portfolio. Meanwhile, MDL has not reported an annual net profit for more than five years now and has also not paid a dividend since it commenced trading as MDL on the ASX in 1999. In addition, MDL’s share price may fall if the offer does not progress. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $ 1.470, which now exceeds the offer price on strong daily volume of close to 17 million.
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Offer Premium Relative to Recent Trading Prices (Source: Company Reports)
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