The Vimy Resources Ltd (ASX: VMY) share price is soaring after a dramatic back-and-forth over a lapsed takeover offer.
Deep Yellow Limited (ASX: DYL) released a statement to the ASX today, saying it offered to purchase the uranium developer in an attempt to create a $687 million uranium-producing entity. However, according to Deep Yellow, Vimy's board failed to engage with it.
Vimy has since responded to Deep Yellow's claims, stating its board didn't see appropriate value in the proposed merger. In fact, Vimy called the bid "unsolicited, unconventionally structured, and non-market premium".
At the time of writing, the Vimy share price is up 7.55% to 28.5 cents. However, it earlier hit 30 cents, a 13% gain on the previous closing price.
Meanwhile, the Deep Yellow share price is currently down 0.93% to $1.06.
Let's take a closer look at today's news.
Vimy share price gains on refuted offer
Vimy has abandoned a takeover proposal that would see its shareholders given 1 Deep Yellow share for every 3.74 Vimy shares they hold. The offer represented a 14.15% premium on Vimy's previous closing price of 26.5 cents.
The prosed takeover would see Vimy shareholders owning 43% of the resulting entity.
Deep Yellow stated it didn't think Vimy meaningfully engaged with its takeover proposal. It also mentioned it believes the offer would have appealed to Vimy's key major shareholders.
However, Vimy has called the proposal "unique", pointing to the fact it was given 72 hours to agree to the takeover and wasn't offered a due diligence period.
Additionally, Vimy stated Deep Yellow's offer didn't consider the value the latter's shareholders would gain from the takeover. Vimy noted the premium offered didn't account for such lost value.
Finally, Vimy stated a 43% hold in the combined company was too small a share.
Instead of merging with Deep Yellow, Vimy will be undergoing another strategic review.
According to Vimy, this review will be looking to de-risk the company's flagship Mulga Rock Uranium Project. It will also assess whether corporate transactions could provide greater value than advancing Mulga Rock on a standalone basis.
Vimy announced its strategic review yesterday. Today, Vimy stated it was disappointed Deep Yellow announced it hadn't engaged with the offer as it had done so in good faith.
What did management say?
Deep Yellow managing director and CEO John Borshoff commented on the rejected proposal, saying:
The merger would have delivered to Vimy's projects an experienced technical team of proven uranium mine builders, able to expedite the development of Mulga Rock. Completion of the merger would have achieved the market consolidation we consider necessary to establish as a first step, a company with significant size and scale to create a leading Tier-1 uranium producer, well positioned to supply a growing uranium market.
In response, Vimy chair Cheryl Edwardes stated:
The Vimy board assessed the unconventionally structured proposal and found it deficient on many points. Expecting any board to sign a binding merger term sheet within 72 hours of receipt with exclusivity and break fee liabilities without due diligence is unrealistic and uncommercial. The Vimy board is committed to maximising value for our shareholders and are open to engaging with all parties in a professional and respectful manner, including Deep Yellow, under appropriate confidentiality arrangements to create a level playing field for all parties that have interest in a corporate transaction.
Vimy share price snapshot
Today's gains included, the Vimy share price has increased 250% since the start of 2021.
It is also 600% higher than it was this time last year.
