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Independence Group to allow takeover offer for Panoramic Resources to lapse

Other third parties are still in the data room of Panoramic Resources Ltd., whose ASX stock fell by as much as 22% on Independence Group NL's Dec. 27 announcement that it would allow its takeover offer for the former to lapse Jan. 17, 2020.

Independence Group made the announcement, having conducted due diligence on Panoramic, with the former's CEO, Peter Bradford, saying Dec. 27 that any merger and acquisition deal must deliver a return to Independence shareholders.

SNL Image
Independence Group CEO
Peter Bradford
Source: Independence Group

Bradford said that while Independence Group's off-market takeover bid based on the Savannah nickel-copper project's 2017 feasibility study represented a "win-win" for both companies' shareholders, Panoramic's subsequent disclosures, including the operational update and need for additional funding, had "significantly eroded" the value proposition for Independence shareholders, which led the company to its decision.

Upon Panoramic announcing Dec. 5 that its board unanimously rejected Independence Group's offer as opportunistic, the target also said it would need to raise about A$31 million in light of its Dec. 4 guidance of forecast lower ore tonnes and nickel grade compared to the 2017 study, along with a softening nickel price.

Those moves breached various conditions of Independence Group's offer. Panoramic's major shareholder, Zeta Resources Ltd., had also labeled the offer opportunistic while reserving the right to accept a superior proposal from Independence Group or any other bidder.

Panoramic announced later Dec. 27 that "third parties remain in the data room," though there is "no guarantee" of a third-party proposal.

It is understood that Panoramic opened the data room to facilitate the potential for a higher offer that might be capable of obtaining recommendation from its board in light of Independence Group's unsolicited offer because it was in the best interests of shareholders.

Further, Panoramic said shareholders who accepted Independence Group's offer will not be able to participate in any third-party proposal until after Jan. 17.

Panoramic also revealed that it had not had any further discussions with Independence Group since independent experts that Panoramic had appointed from KPMG determined that the takeover offer was fair and reasonable in the absence of a superior proposal.

Potential opportunities

Mike Millikan, analyst with Australian broker Hartleys' Resources, said in an interview that another West Australian nickel producer, Western Areas Ltd., is "probably in the data room for Panoramic," while Mincor Resources NL could also need more ore feed as it looks to restart its Kambalda nickel mine.

Independence Group also has shares in Mincor from the former's divestment of its mothballed Long nickel mine to the latter.

Millikan said Independence Group's offer for Panoramic would never eventuate without Zeta's support, though Independence Group's shareholders clearly wanted their company not to overpay for an acquisition, as seen in its slight share price rise on the latest news.

Millikan said Hartleys saw the offer as potentially value accretive for both sets of shareholders at the right price, particularly given Savannah has a concentrator and an orebody just starting to be mined, with a reserve that is likely to be increased over time.

Independence Group also has good control of exploration ground in the west and east Kimberley regions in Western Australia, including 100%-owned acreage around Savannah and joint ventures in the west, as part of its strategy to pursue belt-scale opportunities.

This was also reflected in its recent move to farm into Apollo Consolidated Ltd.'s Louisa nickel sulfide project in the area, which Bradford told S&P Global Market Intelligence at the time was one of about 30 to 40 such exploration deals Independence Group has done across Western Australia.

Euroz Securities' head of research, Jon Bishop, recently said Independence Group also has the major "big swathes" of acreage in the popular Fraser Range in the state's south locked up along with its major investor Creasy Group Pty. Ltd. and Legend Mining Ltd..

Earlier in December, Legend, in which Independence Group owns over 14%, revealed a new frontier in the area with its discovery of massive nickel-copper sulfides at its Fraser Range.

Millikan said he would now be watching for Independence Group's next M&A move, given it has shown its willingness to try it with Panoramic.