Musgrave Minerals’ board has unanimously urged shareholders to reject a takeover offer from Westgold Resources for an implied value of $177.3 million.
Westgold is offering shareholders one share in the company for every 5.37 Musgrave shares.
Westgold is currently trading at $1.34 per share, while Musgrave trades at $0.30.
The company says this offer represents a 30.5 per cent premium to Musgrave’s five-day volume weighted average price, with an implied an equity value of $177.3 million.
Westgold has reached out to shareholders, citing the “strong strategic rationale” of the union between the two companies.
“Westgold is an established, well-funded owner and operator of two processing hubs in the Murchison region,” Westgold managing director Wayne Bramwell said.
“The combination of Musgrave’s assets with our regional infrastructure and operating teams will fast track and de-risk the development of Musgrave’s Cue gold project and provides shareholders immediate exposure to a much larger, established WA gold producer.
“The Westgold offer provides a logical, capital efficient and fast track solution that delivers immediate value to … shareholders and can rapidly enhance production scale and profitability of the combined group.”
But Musgrave’s board has unanimously urged its shareholders to reject the offer, citing a number of factors such as:
- The implied offer price is below the current Musgrave share price
- The offer is opportunistic given Musgrave’s potential.
- Musgrave delivers immediate growth to Westgold.
- The offer is highly conditional and uncertain.
- Musgrave shareholders may face adverse tax consequences if they accept the offer.
The Musgrave board has told shareholders that Westgold’s interest affirms the quality of its Cue gold project.
“The recently released stage one prefeasibility study for the Cue gold project illustrates a technically and financially robust project,” Musgrave non-executive chairman Graham Ascough said.
“Your Directors believe that Westgold recognises the inherent value of the Cue gold project and the 310km2 of tenure in the Cue area of the Murchison Region held by Musgrave.”
Westgold’s offer closes on July 24.