Sirius shareholders will receive 0.66 Independence shares plus 52c cash per share for total consideration of $4.38 per share.
It represents a 35% premium to Sirius’ closing price on Friday, a 46% premium to the one-month volume-weighted average price and a 47% premium to the two-month VWAP.
Each company has a market capitalisation of around $1.3 billion and the merger gives the enlarged Independence a chance to become an ASX 100 company with a $2.7 billion market cap.
The deal will add the Nova nickel project to Independence’s WA portfolio, which also includes the Long nickel mine, Jaguar zinc-copper mine and a 30% stake in the Tropicana gold mine.
Independence managing director Peter Bradford said the deal created a leading diversified mining company with a growing production profile, strong balance sheet and excellent cashflow.
“The acquisition of Sirius continues our stated strategy of building a diversified mining company with a balanced portfolio of exploration, development and producing assets, focusing on high-margin and long life,” he said.
“The proximity of the Sirius and IGO assets in Western Australia creates opportunities to realise synergies and cost efficiencies across a dominant land-holding position.
Sirius MD Mark Bennett and director Neil Warburton will join the Independence board.
Sirius will demerge its gold assets, including the Polar Bear project in Western Australia and assets in Scandinavia, as well as around $22 million in cash.
The new company will be called S2 Resources and Sirius shareholders will receive around 1 share for each 2.5 Sirius shares held, in addition to the merger consideration.
Bennett will exit the company and lead S2 and he said he was proud of what Sirius had achieved in its short history.
“The board and management of Sirius have full confidence in the ability of Mr Peter Bradford and the IGO team to drive the combined company’s projects forward and create significant value for shareholders,” Bennett said.
“The combination of the Sirius development and IGO operational teams, together with their joint exploration experience, will be unrivalled.
“I am looking forward to joining the board of IGO, and to continue my involvement with the ongoing success of the Nova-Bollinger project and the combined entity.
“I am also excited about the opportunities available to Sirius shareholders through the creation of S2, the demerged entity which will include the Baloo discovery and the recently acquired exploration assets in Scandinavia.”
Importantly, the deal has the backing of Sirius’ 34.6% shareholder Mark Creasy.
Creasy will hold around 18.6% of Independence when the deal is complete.
“This transaction brings together the producing assets of Independence and the near production asset of Sirius,” Creasy said.
“The combination of current and future cash flows and diversification of commodities will create a substantial producer that will better be able to manage any increase in volatility in capital and commodity markets.”
Sirius shareholders will be asked to vote on the transaction in late July.
Hartleys and Ashurst are advising Sirius, while UBS, Herbert Smith Freehills, Euroz and Treadstone Partners are Independence’ advisers.
Independence shares were unchanged at $5.85, while Sirius shares were unchanged at $3.24.
