Murchison proposes Mercantile merger

Two years after selling its stake in the failed Oakajee port and rail project, Murchison Metals is set to be absorbed by major shareholder Mercantile Investment Company.

The two companies have entered into a scheme implementation agreement, which will allow Murchison shareholders to cancel their shares in exchange for either cash consideration, Mercantile shares or a 50-50 combination of both cash and scrip.

The deal comes two years after Murchison completed the sale of its 50 per cent stake in the Oakajee project to joint venture partner Mitsubishi Corporation for $325 million.

The Oakajee project effectively collapsed in late 2012 when Mitsubishi cut spending and removed staff from the project.

It officially suspended work at the project in June last year.

Murchison, which no longer has any significant operations, has focused its attention in recent times on returning capital to shareholders through share buybacks.  

The company said the merger with Mercantile would allow shareholders to exit their investment without the need to pay brokerage fees

It said the scheme was in the best interest of shareholders but did not endorse any particular sale option.

Mercantile said the transaction would provide benefits for shareholders of the combined group, including a reduction in fixed expenses and a potential increase in capital depending on how many Murchison shareholders elect to receive scrip consideration.

If all of Murchison's shareholders elect to receive scrip consideration, the merged entity will have net assets of about $52 million and more than 4,000 shareholders.

The transaction also requires approval from the New South Wales Supreme Court, with the implementation date set for June 2014.