THE BOURSE WHISPERER: Independence Group (ASX: IGO) rattled the boards of the ASX in November when it declared its intention to make an off-market takeover offer to acquire all of the ordinary shares of Panoramic Resources (ASX: PAN) it does not already own.
At the date of the announcement, Independence Group’s interest in Panoramic consisted approximately 24.9 million shares, representing approximately 3.8 per cent of the target company’s total issued capital.
IGO explained it opted to directly engage Panoramic shareholders following a number of unsuccessful attempts to engage with the Panoramic Board on a change of control transaction.
The company cited Panoramic’s recent operational performance and the lack of engagement from Panoramic’s Board to date as the impetus behind the offer.
The conditions to the offer include a number of conditions that IGO believes to be necessary to confirm the current status of operating performance at Savannah.
The offer is in the form of one IGO Share for every 13 Panoramic shares held, giving Panoramic a share price of 47.6 cents per Panoramic share, which values the company at around $312 million.
IGO indicated its preference is to conduct an expedited and thorough due diligence process, and to proceed with a recommendation from the Panoramic Board rather than seek the confirmations required under the offer conditions, however IGO said it is prepared to see the offer to completion should the offer conditions be satisfied.
“The Offer represents a rare instance of genuine and obvious mutual benefit for both Panoramic and IGO shareholders,” Independence Group managing director and CEO Peter Bradford said in the company’s announcement to the Australian Securities Exchange.
“Panoramic shareholders will be able to crystallise future value from Savannah at a very attractive price and retain exposure to its upside potential, while also gaining exposure to Nova and Tropicana and IGO’s extensive portfolio of belt-scale exploration projects prospective for nickel and copper.
“The company remains leveraged to the nickel market and we believe IGO has the financial, operational and technical capability to fully unlock value from Savannah and Panoramic’s exploration portfolio.
“Given our unique positioning as Australia’s largest independent producer of nickel, to unlock value at Savannah, we have decided to provide the offer for the consideration of all Panoramic shareholders.”
In response, Panoramic did nothing to surprise anybody by recommending its shareholders take no action in relation to the IGO takeover offer.
“The Board will evaluate the offer and Independence Group’s Bidder’s Statement and provide shareholders with a recommendation in due course,” Panoramic Resources said.
“Until then, shareholders should take no action.”
And no action they did take.
The Directors of Panoramic bounced back this week to inform their shareholders that they didn’t think the offer from IGO was in their best interests.
They recommended that having carefully considered the terms and conditions of the IGO Takeover Offer and taking into account the results of the company’s recently announced operational review at Savannah and other information available to them at the current time, shareholders should REJECT the IGO Takeover Offer.
They must have been serious because the recommendation was in capital letters.
The key reasons for the Panoramic Board’s unanimous recommendation were:
The IGO Takeover Offer is opportunistically timed, which could deprive Panoramic shareholders of future potential value;
Panoramic shareholders’ exposure to the company’s assets and potential upside would be diluted through accepting the IGO Takeover Offer;
Panoramic shareholders’ nickel exposure would be diluted through accepting the IGO Takeover Offer;
The IGO Takeover Offer consideration was for IGO shares, which PAN considered, based on several objective measures, to appear to be trading at an elevated valuation, presenting downside risk to the implied IGO Takeover Offer value;
Accepting the IGO Takeover Offer meant shareholders risk missing out if a superior offer from a third party if it emerges;
Panoramic’s largest shareholder, Zeta Resources, which holds 35.17 per cent of Panoramic indicated it does not intend to accept the IGO Takeover Offer; and
The IGO Takeover Offer is highly conditional and there is no certainty it will proceed.
In response, Independence Group said it would not be taking up the offer to use its 38 per cent holding to participate in Panoramic’s announced non-renounceable entitlement offer to raise approximately $31 million stating the Entitlement Offer breaches a condition of IGO’s takeover offer.
We can only assume this is not the end of this discussion.