Cobalt 27 sets sights on Highlands Pacific in friendly cash takeover

The board of Highlands Pacific (ASX: HIG) has recommended shareholders vote in favour of a $115 million takeover offer lobbed by its largest shareholder, Cobalt 27.

The battery minerals company has agreed to acquire all the shares in Highlands which it does not already own under the PNG Companies Act.

Under the terms of the scheme implementation, Highlands shareholders will receive $0.105 cash per share, representing a 43.8% premium over the company’s $0.073 closing price on Christmas Eve.

This offer could increase to $0.115 if before 31 December 2019, the closing spot price of nickel exceeds US$13,220 per tonne over five consecutive trading days.

For the takeover to be successful, it must receive the go ahead from 75% of Highlands’ shareholders entitled to vote while the scheme also requires approval from the PNG National Court.

Highlands’ largest shareholders have indicated their intention to vote in favour of the takeover in the absence of a superior proposal.

The company expects a shareholder meeting on the takeover to take place in mid to late April.

Providing shareholder certainty

Independent directors of Highlands have expressed confidence in the takeover bid.

The recommendation for shareholders to endorse the deal follows a prolonged effort by Highlands and Cobalt 27 to close a streaming transaction entered into last May to facilitate repayment of the Ramu nickel project loans.

The US$2.1 billion Ramu cobalt nickel project on the north coast of PNG is one of the largest and most ambitious mining and processing projects to have been successfully brought into production in the country during the past decade.

Highlands has an 8.5% interest in the producing Ramu operation.

The streaming agreement between Cobalt 27 and Highlands was subsequently terminated due to delays in approval, leaving the board to examine all remaining options to maximise shareholder value.

The independent directors are of the belief the scheme is in the best interest of shareholders following cancellation of the streaming agreement and given the offer is a significant premium.

Separately, Highlands has agreed to negotiate an agreement with PanAust, one of its largest shareholders, for the company to transfer its interest in Highlands and cancel any outstanding debt Highlands owns.

In return, Highlands will transfer its 20% interest in the giant Frieda River copper-gold project in PNG to PanAust.

Toronto-based Cobalt 27 said the deal would diversify its portfolio and provide it with increased exposure to high-growth nickel assets and regional investment opportunities.

Highlands shares soared 35.6% to $0.099 on the news after emerging from a trading halt.