Sandfire shares are now changing hands at $5.42 apiece, a 13% drop from the market open a few moments ago.
Here’s what we know.
What did Sandfire announce?
In what’s been deemed a negative for the Sandfire Resources share price, the mining company announced it had completed an institutional placement and entitlement offer.
Sandfire is raising the money to finance the purchase of Minas De Aguas Tenisas (MATSA) mining complex in Spain for $2.572 billion, announced last week.
It is acquiring the complex on a 4.8x FY21 EBITDA multiple and is going in with Trafigura and Mubadala Investment Company on the deal.
As per the release, the placement portion will raise approximately $285 million, whereas the institutional entitlement offer will raise an additional $641 million.
The retail component of the offer is fully underwritten also and will raise around $322 million as well. As it stands, the total expected capital to be raised is approximately $1.25 billion.
Interestingly the proposal was made at an offer price of $5.40 per share – a slight discount to Sandfire’s current market price – and a 13.2% discount to its “last traded price of $6.22 per share on 22 September 2021”.
Sandfire will use an additional $297 million of its own cash reserves and draw down $200 million of an existing debt facility to make up the remaining balance of the transaction.
Superannuation fund AustralianSuper also got in on the deal, on the receiving end of a $120 million strategic placement.
In a year full of merger and acquisition (M&A) activity, there have been mixed results on the share price of companies participating in the trend.
On this basis, it is unclear what long-term effect the acquisition will have on the Sandfire Resources share price.
Alas as it stands today, Investors appear to have sold on the news, perhaps favouring a different outcome or method of financing the transaction.
Sandfire Resources share price snapshot
The Sandfire Resources share price has had a difficult year to date and posted a return of just 1.3% since January 1 of this year.
Nonetheless, over the last 12 months, it has climbed 29% into the green, ahead of the S&P/ASX 200 Index (ASX: XJO)’s return of about 25% in this time.
Despite this, the Sandfire share price has slipped 15% over the past month and is down 13% in the last week.