IGO share price charges higher after lifting its Western Areas takeover offer

IGO has returned with a better offer fro Western Areas…

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Key points

  • IGO shares are charging higher today after the battery materials miner upped its takeover offer for Western Areas
  • IGO has lifted its offer by 15.2% to $3.87 per share from $3.36 per share
  • Western Areas' board and a major shareholders are supportive of the proposal

The IGO Ltd (ASX: IGO) share price is on form on Monday morning.

At the time of writing, the battery materials producer’s shares are up over 4% to $14.28.

Why is the IGO share price charging higher?

Last week the battery materials miner’s proposed takeover of nickel producer Western Areas Ltd (ASX: WSA) collapsed after the independent expert ruled that the proposal was not in the best interests of the latter’s shareholders.

This morning, IGO decided to up the ante and return with a better offer which it believes will be acceptable to the independent expert.

According to the release, IGO has agreed to increase its offer to $3.87 cash per share, which is 15.2% higher than its previous proposal of $3.36 per share.

Positively, the amended proposal has been unanimously recommended by the Western Areas board. This is in the absence of a superior proposal and subject to the independent expert concluding that it is in the best interests of shareholders.

Also supporting the proposal is Wyloo. It will vote all the shares it owns through its 9.8% stake in favour of the deal pending the same conditions above.

Management commentary

Western Areas’ Chairman, Ian Macliver, was pleased with the new proposal.

He said: “The Western Areas Board is pleased to have negotiated an agreement with IGO considering the recent volatility in the nickel price and the positive impact this has had on Western Areas cashflow position and fundamental asset value since the Initial Scheme was announced on 16 December 2021. Forrestania is capturing the upside in near and medium term nickel prices, while Odysseus is positioned to capitalise on the longer-term nickel price driven by growth in electric vehicles.”

IGO’s Managing Director and CEO, Peter Bradford, believes that the higher takeover proposal will still create value for the company and its shareholders.

He commented: “The Revised Scheme Consideration shares value with WSA shareholders, while maintaining a very strong value proposition for IGO shareholders over the longer term. IGO looks forward to building WSA shareholder support for the transaction, while in parallel continuing the important integration workstreams that have already commenced, as we work toward transaction completion.”

Mr Bradford highlights that the acquisition is aligned with IGO’s strategy focused on metals critical to clean energy and is expected to free cash flow accretive from FY 2024 once the ramp up of the Odysseus underground mine development is complete.

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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