Western Areas (ASX:WSA) share price rockets 18% on IGO takeover interest

This nickel producer could soon be taken over…

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The Western Areas Ltd (ASX: WSA) share price is rocketing higher on Thursday morning.

At the time of writing, the nickel producer’s shares are up a massive 18% to $2.92.

This leaves the Western Areas share price trading within sight of its 52-week high of $3.10.

Why is the Western Areas share price rocketing higher?

The catalyst for the rise in the Western Areas share price today has been news that the company is in takeover talks with rival IGO Ltd (ASX: IGO).

This morning Western Areas confirmed that it is in preliminary discussions with IGO in relation to a change of control proposal.

However, the company acknowledges that discussions are at a preliminary stage. As such, there can be no assurance whether any transaction will eventuate. Nor are there any assurances on what the terms and conditions of any such transaction might be.

Western Areas intends to continue to keep shareholders updated as appropriate.

IGO responds

IGO has also confirmed the reports. It stated: “IGO confirms that it is in preliminary discussions with Western Areas in relation to a change of control proposal and the basis upon which engagement and due diligence could proceed.”

And much like Western Areas, it has warned that there is no certainty as to whether a definitive transaction will eventuate.

Why Western Areas?

Given the increasing demand for nickel from the electric vehicle market, IGO appears to see Western Areas as a good addition to its growing battery materials portfolio. Particularly given how its Nova nickel operation is nearing the end of its mine life.

At its Diggers and Dealers appearance earlier this month, the company’s presentation showed that demand for nickel is expected to increase by 5.2x by 2030 from 2021 levels. It clearly sees the acquisition of Western Areas as a great way to benefit from this increasing demand.

However, with the IGO share price down 4% today, some investors don’t appear convinced by the move.

Should you invest $1,000 in Western Areas right now?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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