Cannon a target for takeover

Shares in West Perth nickel junior Cannon Resources have shot up after of an all-cash $45 million takeover offer from a Toronto-based private equity firm.

Cannon and a subsidiary of Kinterra Battery Metals Mining Fund entered a bid implementation agreement for the Canadian firm to buy all shares in the explorer at 45 cents apiece.

The offer is a significant premium to Cannon’s recent share price, representing a 43 per cent increase on its last close and a 58 per cent increase on its 30-day volume-weighted average price.

Overall, the offer values Cannon at approximately $45 million.

The proposal has already won the backing of Cannon’s biggest shareholder, Ponderosa Investments WA, which has accepted the offer in respect of its 15.5 per cent interest in the company.

It means Kinterra has secured just shy of a 20 per cent stake in its target. 

Cannon’s two main projects are the Fisher East and Collurabbie exploration tenements in the northern Goldfields, 200 kilometres north east of Leonora.

Cannon non-executive chairman Alex Passmore and fellow board members have unanimously recommended shareholders accept the deal in the absence of a superior offer.  

“Kinterra’s offer creates an excellent opportunity for Cannon shareholders to realise value for their investment while moving the asset to Kinterra, which can take Fisher East to the next stages of development,” Mr Passmore said in a statement.

“Fisher East is at an inflection point and this transaction removes the risks and equity dilution associated with the next phase of intensive project development work.”

Rox Resources – of which Mr Passmore was chief executive officer up until last week - owns a 10 per cent stake in Cannon Resources, though the holding is currently subject to imposed escrow restrictions until August 2023.

Rox demerged its nickel and base metals assets into Cannon, which listed on the ASX in August 2021.

But the company says it will be permitted to accept the takeover offer once acceptances for shares not held in escrow hit 50 per cent.

Kinterra will also loan Cannon $1 million to tide the company over during the offer period.

Thomson Geer is legal adviser to Cannon.

Taylor Collison is financial adviser and Allen & Overy legal advisor to Kinterra’s camp.

On the market, Cannon Resources shares were up 38.1 per cent to trade at 44 cents.