CATALIST-listed Alliance Mineral Assets Limited and Australia-listed Tawana Resources NL have agreed to "a merger of equals" that will create a mid-tier lithium producer with pro-forma market capitalisation of A$446 million (S$450.4 million).
Both companies have entered into a definitive scheme implementation agreement for the planned merger that is being pursued via a scheme of arrangement under the Australian Corporations Act 2001.
Once the scheme is implemented, Alliance will acquire all of Tawana's issued share capital at 1.10 Alliance share for each Tawana share. The implied consideration for each Tawana share is 37.4 Singapore cents, based on the closing share price of 34 Singapore cents for Alliance shares on the last trading day.
The merger is subject to shareholders' and regulatory approvals. On completion of the merger, Tawana will become a wholly owned subsidiary of Alliance, with existing Alliance shareholders owning about 51 per cent of, and existing Tawana shareholders owning about 49 per cent of the merged entity.
The merger is expected to be completed by the fourth quarter of 2018.
Alliance and Tawana are equal partners in the Bald Hill project in Western Australia. The merged entity will therefore own 100 per cent of this project, which is expected to start producing and delivering its first lithium concentrate in April 2018.
Lithium is a sought-after metal for manufacturing long-life batteries that power up electric vehicles and consumer electronics devices.
Alliance said in a disclosure that the merger will create a mid-tier lithium producer and simplify the ownership and operational management of the Bald Hill project.
The directors of Alliance with a shareholding of 0.1 per cent of the company's issued capital have unanimously recommended for shareholders to accept the planned merger. They have also expressed the intent to vote in favour of the merger, in the absence of a superior proposal.
Alliance's substantial shareholder, Burwill Holdings, which holds 14.1 per cent of Alliance's issued share capital, has also entered into a binding agreement to vote in favour of the merger.
In addition, the planned merger has drawn support from the directors of Tawana, Alliance's shareholders holding about 20.4 per cent of the company's issued equity, and Tawana's shareholders holding about 32.6 per cent of issued equity in the company.
Alliance and Tawana have lined up separate equity raising exercises on the back of this planned merger.
Alliance aims to raise gross proceeds of A$25 million from a fully under-written placement to sophisticated and institutional investors. It also plans to raise A$7.8 million in gross proceeds from a non-underwritten placement to Burwill.
Tawana has lined up a fully underwritten placement to raise before costs, A$20 million from professional and sophisticated investors. It has also reserved the right to place up to a further A$5 million to sophisticated and institutional investors on a non-underwritten basis.
Proceeds from these placements will go to fund additional working capital needs and to enable continued commissioning of Lithium and Tantalum production in the Bald Hill project.