The Norwest Energy NL (ASX: NWE) share price is rocketing higher on Friday morning despite the market selloff.
At the time of writing, the energy explorer's shares are up 31% to a new high of 5.9 cents.
This compares very favourably to a disappointing 1.1% decline by the All Ordinaries index (ASX: XAO).
Why is the Norwest Energy share price rocketing higher today?
Investors have been scrambling to buy the company's shares this morning after it received a takeover offer from its joint venture partner at the Lockyer Deep gas project in the Perth Basin – Mineral Resources Ltd (ASX: MIN).
According to the release, Mineral Resources plans to table an offer of one fully paid ordinary share for every 1,367 Norwest Energy shares held on the register date.
Based on the Mineral Resources share price at Thursday's close, this implies an offer price of 6 cents per Norwest Energy share. This represents a sizeable premium of 33.3% to its last close price and Norwest Energy's equity at $403 million.
Mineral Resources' managing director, Chris Ellison, believes the transaction would create value for both sets of shareholders. He commented:
The scrip-based Offer for our JV partner Norwest will consolidate Lockyer Deep's project ownership and provide Norwest Shareholders with exposure to a bigger prize. It is also a natural progression that can create lasting value for both groups of shareholders under the MinRes ownership umbrella.
This Offer presents a compelling and unique opportunity for Norwest Shareholders to join the MinRes family and be part of the next chapter in our significant value creation.
Past successes
Mineral Resources also listed a number of similar transactions that have been very successful for the shareholders of acquired companies.
This includes Polaris Metals shareholders benefiting from a 1,837% total shareholder return and Mesa Minerals shareholders benefiting from a 1,529% total shareholder return since these transactions closed in 2010.
It also notes that the Norwest Energy share price could fall if a takeover doesn't happen. Particularly given how the company is exposed to funding and development uncertainties.
The Norwest Energy board has not yet made a recommendation to its shareholders regarding the proposed takeover.
