Andromeda Metals Ltd (ASX:ADN) and Minotaur Exploration Ltd (ASX:MEP) are set to create a leading Australian kaolin/halloysite and technology company by consolidating 100% ownership of the Great White Kaolin Project and Natural Nanotech into Andromeda.
Andromeda and Minotaur Exploration have entered into a bid implementation agreement (BIA), which will see Andromeda acquiring all the issued ordinary shares of Minotaur by way of an off-market takeover offer with 1.15 new Andromeda shares offered for every 1 Minotaur share.
Minotaur shareholders will hold ~19.5% interest in the enlarged Andromeda.
In addition, Minotaur is to separately demerge its copper and gold assets into Minotaur subsidiary, Breakaway, which it intends to list on the ASX.
"Logical and exciting opportunity"
Andromeda managing director James Marsh said the transaction and combination with Minotaur was logical and an exciting opportunity to unlock and create value:
“The acquisition of Minotaur and consolidation of the Great White Kaolin Project represents a significant step towards optimising value for both Andromeda and Minotaur shareholders.
"We view this acquisition and resultant consolidation of Great White and Natural Nanotech ownership as a logical positive next step in the evolution of the project, unlocking value for all Andromeda and Minotaur shareholders.
“Great White is an exciting, low-cost project capable of supplying premium grade refined kaolin minerals into growing market demand for high-value bright-white halloysite-kaolin in ceramic/paint sectors and other applications.
“Consolidating ownership of Great White provides for increased future funding flexibility and development optionality.
“We will welcome Minotaur shareholders to Andromeda’s register and for them to continue to benefit from further progress at Great White as we optimise the project and progress towards production in 2022.”
"To crystalise value"
Minotaur managing director Andrew Woskett added: “It is an opportune time for Minotaur shareholders to crystalise value for Great White and Natural Nanotech, whilst retaining their exposure to Minotaur’s copper and gold projects.
“By accepting the offer, Minotaur shareholders will realise immediate value for their stake in the Great White Project and maintain exposure to the project, via their new Andromeda shares.
“In addition, we are excited to be packaging up Minotaur’s base metal and gold assets into subsidiary Breakaway and apply for its listing on the ASX, in which Minotaur shareholders will receive pro-rata shares.
“Breakaway will focus primarily on its gold, copper and base metals projects in Queensland and South Australia, continuing the quality work which has brought discovery recognition.”
The offer
The offer is accretive for Andromeda, providing Andromeda shareholders with an increased effective interest in Great White and Natural Nanotech, whilst delivering strategic and financial benefits.
Gaining 100% ownership of Great White will deliver a simplified and streamlined ownership and will enable the design, funding mix and timetable for development of Great White to be optimised.
Similarly, 100% ownership of Natural Nanotech will enable enhanced development and commercialisation of any future intellectual property in relation to new technology created for halloysite applications and uses, including battery technology, water purification and carbon capture.
The offer delivers a premium for Minotaur shareholders and implies a Minotaur equity valuation of $108 million.
Minotaur shareholders will own about 19.5% of Andromeda post the offer being fully implemented.
Andromeda will become a company with enhanced scale and market relevance, with an implied market capitalisation of $552 million (prior to any re-rate) and where the all-scrip consideration of the offer will preserve Andromeda’s strong balance sheet which has current cash of $46 million and nil debt as at September 30, 2021.
Copper and gold exploration
Minotaur intends to demerge its existing copper and gold exploration assets through its subsidiary, Breakaway Resources Pty Ltd, via a pro-rata in specie distribution of Breakaway shares to Minotaur shareholders.
The demerger enables Minotaur shareholders to retain full exposure to the value and the potential upside of these assets and the benefit of Minotaur’s highly credentialled board and management team in a clearly focused exploration company, which is intended to be listed on the Australian Securities Exchange.
This offer and demerger will be undertaken in parallel, with the demerger completed by way of an equal capital reduction.
The demerger is subject to Minotaur shareholder approval.
Based on the five-day volume-weighted average price (VWAP ) of Andromeda’s shares of $0.181 on November 8, 2021, it implies a value of $0.208 per Minotaur share.
The implied offer price represents a premium of:
- 59.8% to Minotaur’s last close price of $0.130 prior to the announcement date;
- 55.1% to Minotaur’s five-day VWAP of $0.134 up to the announcement date; and
- 67.6% to Minotaur’s 30-day VWAP of $0.124 up to the announcement date.
The offer is subject to certain conditions customary for a transaction of this nature, including a 90% minimum acceptance condition, deal protection mechanisms including 'no shop, no talk' restrictions, a market-standard break fee payable in certain circumstances and Minotaur shareholder approval for the demerger.
The offer will extend to all Minotaur shares, including those issued as a result of the exercise of options during the offer period.
Separate offers are being made for unlisted options in Minotaur, on terms that are consistent with the offer.
Further details of the offer, including its material terms and conditions, can be found in the attached BIA. The Andromeda’s Bidder’s Statement and Minotaur’s Target’s Statement are expected to be despatched to Minotaur shareholders by the end of November 2021.
Board recommendation
The Minotaur Board of Directors unanimously recommend that Minotaur shareholders accept the offer, in the absence of a superior proposal.
Minotaur’s directors have advised they will accept the offer in respect of all Minotaur shares they own or control (representing 1.8% of Minotaur’s issued shares) within five days after the offer has opened, in the absence of a superior proposal.
In addition, several of Minotaur’s largest shareholders (representing 12.9% of Minotaur’s issued shares) have indicated to Minotaur their intention to accept the offer for all the shares they currently own or control, in the absence of a superior proposal.
Interim funding
Andromeda and Minotaur have agreed on a budget for Minotaur for the period from the date of the BIA to the expected completion of the takeover.
Andromeda is making available to Minotaur an amount of up to $4.0 million by way of short-term funding for the purpose of funding expenditure within the approved budget and to seed Breakaway with up to $2 million (pre-costs of the IPO) on completion of the demerger.
Further detail on the interim funding arrangements, including triggers for maturity and methods of repayment, are set out in the funding deeds.
Advisors
Andromeda has appointed Taylor Collison as financial advisor and MinterEllison as legal advisor.
Minotaur has appointed Argonaut PCF as financial advisor and Steinepreis Paganin as legal advisor.