Shares in the wood fibre processor and exporter closed yesterday at 76.5 cents. In early morning trade, they leapt to $1.275 apiece, up 66.7%. Since then, they have retraced a touch and are currently swapping hands for $1.25, up 63.4%.

For some context, the S&P/ASX Small Ordinaries Index (ASX: XSO) is flat at this same time.

As you likely guess from the title of this article, investors are piling into the ASX microcap stock today following the announcement of a takeover offer.

Here's what's happening.

ASX microcap stock soars on acquisition bid

The Midway share price is going ballistic after the company reported it has entered into a binding Scheme Implementation Deed (SID) with RCM BidCo to acquire all of Midway's shares via a scheme of arrangement.

BidCo is owned by funds managed and advised by River Capital.

Under the proposal, shareholders of the ASX microcap stock would receive $1.19 cash per Midway share. This sum includes the partially franked special dividend of 38 cents per share Midway expects to pay.

At $1.19 a share, this implies an equity value for Midway of around $104 million.

The Midway board said it unanimously recommends that shareholders vote in favour of the scheme in the absence of a superior proposal, subject to an independent expert review certifying that this is in shareholders' best interests.

Midway's largest shareholder, Chebmont, which holds or controls approximately 23.8% of the ASX microcap stock, has said it will vote all its shares in favour of the takeover proposal.

What did management say?

Commenting on the takeover bid sending the ASX microcap stock rocketing today, Midway chairman Gordon Davis said:

The Midway board has carefully considered River Capital's proposal and made an evaluation of Midway's strategic plan as an independent company and the various operational and execution risks inherent in achieving this strategic plan and is unanimous in its recommendation to shareholders.

The Midway board believes the Scheme is an attractive opportunity for Midway shareholders to receive cash consideration at a significant premium, or, alternatively, continue the journey as shareholders in RollCo under the control of River Capital.

The company noted that under the proposal, and if certain conditions are met, Midway shareholders can elect to receive scrip consideration in BidCo's holding company or a mix of cash and scrip instead of the cash consideration.

Shareholders in the ASX microcap stock were advised that they do not need to take any action at the present time.

The post Guess which ASX microcap stock just rocketed 67% on takeover news appeared first on The Motley Fool Australia.

In early trade, the ASX small cap stock is up 1% to $1.16.

Why is this ASX small cap stock rising?

Investors have been buying Midway's shares today thanks to an announcement out of mining giant Rio Tinto Ltd (ASX: RIO).

But firstly, what is Midway?

It is Australia's largest woodfibre processor and exporter with a strong and growing carbon abatement management business. Midway's fibre is used in recyclable paper and packaging, plastic replacement products.

What was announced?

This morning, Rio Tinto announced that it will develop Pongamia seed farms in Australia as part of a new biofuels pilot. This project will explore the potential of Pongamia seed oil as a feedstock for renewable diesel, a cleaner alternative to traditional fossil fuels.

The mining giant advised that the pilot aims to determine if Pongamia seed oil can contribute to Rio Tinto's renewable diesel needs while potentially contributing to the growth of a new biofuel sector in Australia.

It is in the final stages of acquiring approximately 3,000 hectares of cleared land near Townsville in north Queensland to establish farms to study growth conditions and measure seed oil yields.

As part of the process, Rio Tinto has partnered with Midway to oversee the planting and management of the Pongamia seed farms. The ASX small cap stock will engage with nurseries, agricultural experts and research organisations throughout the pilot, and prioritise opportunities for Traditional Owners and local communities.

Why is it doing this?

Rio Tinto notes that as part of its ongoing efforts to achieve net-zero Scope 1 and 2 carbon emissions by 2050, it is actively exploring the potential of biofuels in the low-carbon energy mix.

It sees biofuels as an avenue to reduce reliance on fossil diesel, while fleet electrification technologies mature. Rio Tinto is also investigating how biofuels could be used in scenarios where electrification may face practical limitations.

Rio Tinto's chief decarbonisation officer, Jonathon McCarthy, said:

Diesel accounts for around 10 percent of our emissions footprint in Australia. While we continue to pursue electrification as the long-term solution for displacing the majority of our diesel use, the Pongamia seed pilot is an important parallel pathway that could reduce our reliance on diesel in the mid-term. It also presents a compelling option for other applications that are challenging to electrify, including blasting and non-haul equipment.

The ASX small cap stock's managing director, Tony McKenna, was very pleased with the partnership. He said:

We are very excited to be partnering with Rio Tinto on this innovative pilot project. We are proud to be playing an important role in helping develop a sustainable domestic biofuel industry. The collaboration continues the growth of our position as trusted providers with the capability and experience to deliver a variety of projects for emitters who are committed to seeking alternative solutions to reduce their net emissions.

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