IGO reveals $1.1bn deal

Perth nickel company IGO has continued to push its clean energy strategy confirming it will acquire rival Western Areas in an all cash takeover, ending months of speculation.

Both IGO and Western Areas entered a brief trading halt this morning pending an announcement regarding a potential acquisition, all but confirming the deal between the nickel miners would go ahead.

IGO revealed shortly after that it had entered a scheme implementation deed to acquire 100 per cent of Western Areas for $3.36 per WSA share, a step change on the previous all scrip rumours previously speculated.

The deal values Western Areas at just under $1.1 billion.

The buy will be funded via existing cash reserves and a new $900 million debt facility underwritten by ANZ, CBA and NAB.

IGO's appraisal represents a 35.5 per cent premium to the undisturbed WSA share price from August 18, just before takeover talks sent company shares up some 24 per cent in the months following.

In picking up Western Areas, IGO takes control of the company’s portfolio of lithium and nickel assets including the Forrestania nickel operations near Kalgoorlie and the Cosmos nickel operation near Leinster.

The $299 million Odysseus mine is also in development, which IGO plans to fund via cashflows to come. 

Broadly, IGO says the buy ties in with its strategy to focus on metals critical to clean energy.

Needed to seal the deal however will be approval from Western Areas shareholders, most notably Forrest-backed Wyloo Metals.

Wyloo upped its stake in Western Areas from 5.28 per cent to 6.29 per cent, just days after media speculation on a deal between IGO and Western Areas resurfaced.

Major Western Areas shareholder Perpetual, which owns a 14.7 per cent interest in the business, has indicated it will vote in favour of the takeover if the scheme proceeds.

That is, in the absence of a superior proposal or offer to acquire any WSA shares held by Perpetual.

IGO managing director and chief executive Peter Bradford described the deal as a logical consolidation.

“Both Forrestania and Cosmos are high-grade, low-cost nickel sulphide operations and this acquisition, together with our existing world class Nova nickel-copper-cobalt operation, will consolidate our position as Australia’s leading independent nickel producer,” Mr Bradford said in a statement.

“The unique synergies that will be unlocked across a combined Western Australian nickel hub, combined with the potential downstream optionality that this transaction brings, is expected to generate substantial value for IGO shareholders over the long term.”

The deal rounds off a bumper year for the Bradford-helmed business, which bought a 49 per cent stake in Tianqi Lithium earlier this year and sold a 30 per cent interest in the Tropicana gold mine to Regis Resources in April.

Macquarie Capital is advising IGO on the deal and Herbert Smith Freehills is providing legal.

Western Areas' financial advisers are Rothschild & Co and Goldman Sachs with Ashurst as legal adviser. 

IGO shares last traded at $10.63 and Western Areas at $3.24.