Shares in Zenith Minerals Ltd (ASX: ZNC) are trading 10% higher after the company said it had received a scrip takeover offer from Forrestania Resources Ltd (ASX: FRS).
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Board backing it in
The Zenith board is recommending the bid, under which Zenith shareholders would receive one Forrestania share for every 4.3 Zenith shares held.
This would value Zenith shares at 13.2 cents, compared to the 9.9 cents they were changing hands for on Tuesday morning, up 10%.
Zenith said the Forrestania offer followed a strategic review process it started on May 7, and the Zenith board, which owns about 4.5% of the company, was unanimously recommending the offer.
The company said:
The Zenith Board believes the Transaction represents an attractive strategic and financial outcome for Zenith shareholders, providing a premium to recent trading prices while enabling shareholders to retain exposure to the future value potential of Zenith's assets through ownership in Forrestania.
Zenith said the combination of the two companies had many benefits, including the potential to accelerate its Dulcie gold project, which had experienced "transformational growth" and now had a mineral resource of 675,000 ounces of gold.
Zenith shareholders would also be able to get rollover tax relief from capital gains tax, provided Forrestania gained control of at least 80% of Zenith shares.
Zenith Managing Director Andrew Smith said:
The proposed combination with Forrestania represents a significant milestone for Zenith and follows a period of transformational growth across our portfolio, particularly at the Consolidated Dulcie Gold Project. Over the past two years, Zenith has successfully consolidated the broader Dulcie corridor and defined a JORC (2012) Inferred Mineral Resource of 675,000 ounces of gold across a ~6 kilometre mineralised trend within the Forrestania Belt. We believe this work has established Dulcie as one of the most significant emerging gold development projects in the district. The Board believes the combination with Forrestania provides Zenith shareholders with exposure to a larger and more diversified gold company, with enhanced funding capacity, technical capability and a regional operating platform that has the potential to accelerate the development of Zenith's assets.
The offer is subject to a minimum acceptance condition of 50.1%.
Already a significant shareholder
Forrestania told the ASX in a statement that it had so far acquired a 9.72% stake in Zenith.
Forrestania shares fell 9.7% on Tuesday morning to 46.5 cents, but are up 528% over the past 12 months, valuing the company at $680.7 million.
Zenith is valued at $54 million.
