Shares in emerging minerals company Andromeda Metals Ltd (ASX: ADN) charged into the red this morning. And that's where they stayed. At market close, Andromeda shares finished the day down 17.5% at 16.5 cents apiece.
Andromeda shares have been out of the money after it announced plans to merge with Minotaur Exploration Ltd (ASX: MEP).
The merger would see the creation of a 'leading' minerals and technology company. It would do this by consolidating 100% ownership of the Great White Kaolin project and Natural Nanotech into Andromeda.
Here are the details.
Andromeda and Minotaur Exploration to merge
Investors were exiting their Andromeda positions at a rapid pace on news of the planned merger – but not on Minotaur's side.
Unlike Andromeda, the Minotaur share price finished 38.46% higher at 18 cents after today's announcement.
Andromeda announced it will acquire Minotaur via an off-market takeover, with the pair signing a bid implementation agreement to do so.
The deal will see an exchange of 1.15 new Andromeda shares for every Minotaur share owned. This values Minotaur shares at 20.8 shares apiece, or $108 million at the company level.
At this rate, Andromeda is paying a premium of about 60% to Minotaur's closing price on 8 November, and a more than 67% premium on its 30-day volume weight-adjusted price.
It also implies a 60% premium on Minotaur's current market capitalisation of $65 million.
The acquisition is an 'accretive' one for Andromeda that "unlocks significant strategic and financial benefits" via a number of moving parts.
This includes increasing its shareholders' "effective equity interest in Great White and Natural Nanotech" alongside "consolidating 100% ownership of Great White and Natural Nanotech into a single entity."
This, the company states, will provide Andromeda with full development optionality to continue expanding operations.
In addition, the deal will result in Minotaur shareholders holding an approximate 19.5% interest in the 'enlarged' Andromeda.
For Andromeda investors, the release notes a potential benefit by "Providing an enhanced investment proposition for existing and new shareholders with potential for market re-rating of Andromeda's share price post offer completion."
Andromeda share price snapshot
The Andromeda share price has been swimming in a sea of red these past 12 months. Andromeda shares have posted a loss of ~11% in that time.
This comes after tanking a further 40% this year to date, well behind the benchmark S&P/ASX 200 Index (ASX: XJO) gain of 12.7%.
