Here’s why the Gascoyne (ASX:GCY) share price is rocketing 23% today

It’s been a busy year for mergers and acquisitions on the ASX.

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The Gascoyne Resources Ltd (ASX: GCY) share price is surging today, up 22.6% at time of writing, to 38 cents per share.

The All Ordinaries Index (ASX: XAO), for context, is up a more modest 0.9% at this same time.

Below we look at the takeover offer that appears to be driving investor interest in the ASX gold explorer.

What takeover offer is in the making?

The Gascoyne share price is rocketing after the company reported that Westgold Resources Ltd (ASX: WGX) has announced its intentions for an unsolicited and conditional off-market takeover offer for all of Gascoyne’s shares.

Westgold has proposed to offer 1 of its shares for every 4 Gascoyne shares.

At time of writing the Westgold share price is down 0.9% to $1.64 per share. At that level, the offer values the Gascoyne share price at 41 cents per share, some 8% below where it’s trading today.

According to the ASX release by Westgold, its offer will allow Gascoyne shareholders to keep their exposure to the gold explorer’s assets, while becoming part of a bigger and better funded group “which is already the dominant gold producer in the region”.

Aside from shareholder approval and the other standard conditions, Westgold’s takeover offer is contingent on the merger between Gascoyne and junior explorer Firefly Resources Ltd (ASX: FFR) not going forward. The Firefly share price is down 18%.

Commenting on the takeover offer, Westgold’s executive director, Wayne Bramwell said:

The Independent Technical Assessment and Valuation Report in the proposed Firefly Scheme sees Gascoyne merge with a junior explorer offering all the risks associated with early-stage exploration assets…

The Westgold announced intention to bid provides a clear and logical alternative that reduces uncertainty and risk around the longevity of the Dalgaranga mine, the future of Mt Egerton and Glenburgh and the ongoing funding risks to Gascoyne shareholders.

The combination of Westgold and Gascoyne is strategic and value accretive for both groups as we believe the regional integration of mining, processing infrastructure, exploration assets and people can rapidly expand production capacity…

Gascoyne’s Board recommended that shareholders take no action at this time. The Board said it will inform shareholders of further developments as they occur.

Gascoyne share price snapshot

Despite today’s big lift, the Gascoyne share price remains down 21% year-to-date. The All Ords, by comparison, is up 9% so far in 2021.

Over the past month Gascoyne shares have gained 16%.

Should you invest $1,000 in Gascoyne right now?

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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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