Azure Minerals share price jumps 44% on $1.6b SQM takeover deal

This explorer is being acquired by one of the world's largest lithium miners.

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The Azure Minerals Ltd (ASX: AZS) share price has returned from its suspension with a bang on Thursday.

In morning trade, the lithium explorer's shares are up 44% to $3.52.

Why is the Azure Minerals share price rocketing?

Investors have been scrambling to buy the company's shares today after it announced that it has entered into a binding transaction implementation deed (TID) with Sociedad Química y Minera de Chile S.A. (NYSE: SQM).

Under the TID, it is proposed that SQM will acquire 100% of the shares in Azure Minerals by way of a scheme of arrangement for a cash amount of $3.52 per share.

In addition, there is a simultaneous conditional off-market takeover offer for a cash amount of $3.50 per share should the scheme not be successful.

The scheme consideration is a 44.3% premium to its last close price and values Azure Minerals at $1.63 billion.

It is also a 52.4% premium to SQM's previous proposal of $2.31 per share, which was rejected in August.

Unanimously recommended

The Azure board unanimously recommends the transaction in the absence of a superior proposal and subject to the independent expert's report.

One of Azure's major shareholders, Delphi Group, intends to support the transaction, subject to no superior proposal emerging.

Azure's Managing Director, Tony Rovira, said:

Having carefully considered the merits of the Transaction, the Azure Board has unanimously concluded that the Transaction is in the best interests of Azure shareholders.

Whilst we firmly believe that Andover has the potential to be a major lithium project, there is significant time, cost and risk associated with developing a project of this scale, particularly in the context of an uncertain broader economic outlook. As such, the Board believes that the Transaction provides Azure shareholders with a compelling opportunity to de-risk their investment and realise certain value at an attractive premium to historical trading levels.

Will a better offer be made?

With the Azure Minerals share price trading in line with the takeover offer, it seems that some investors believe a superior proposal could materialise.

However, it is worth remembering that SQM already has a ~20% shareholding in Azure Minerals. This makes it very difficult for anyone else to acquire the company. You only need to look at the collapsed takeover of Liontown Resources Ltd (ASX: LTR) to see why.

The scheme is not subject to any financing or due diligence conditions. However, it will need FIRB approval.

The Azure Minerals share price was trading at 28 cents 12 months ago. Quite a turnaround!

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 Scott Phillips.

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