Kula Gold Ltd. directors advised its shareholders to take no action on the proposed off-market takeover offer from Geopacific Resources Ltd. until a formal recommendation from the board.
The board will not be in a position to make a recommendation until it has more information and has received the formal takeover offer as well as the accompanying statement, Kula said April 5.
Earlier in the day, Geopacific said it intends to offer 1 share for every 1.47 Kula shares, equivalent to 2.8 Australian cents per Kula share.
Geopacific is currently undertaking the second tranche of work to earn an 80% stake in Kula's Woodlark Island gold project in Papua New Guinea. Until the work is completed, the project remains 95% owned by Kula.
Under the circumstances, Kula believes the offer is "opportunistic and undervalued."
Meanwhile, Geopacific noted that Franklin Advisers Inc., which manages about a 17% interest in Kula, has agreed to accept the offer.
Additionally, Kula said the planned 1-for-8 rights offer of shares to shareholders at an issue price of 1.5 cents per share, remains unaffected by the anticipated takeover offer. The rights offer is expected to close April 13.