Cobalt 27 Capital Corp. [KBLT-TSXV; 270-FSE] and Pala Investments Ltd. of Zug Switzerland, have amended an agreement which provides for the acquisition by Pala of all the outstanding Cobalt 27 shares that it doesn’t already own.
Back in June, 2019, the companies said Pala already owned 19% of Cobalt 27’s outstanding shares, and had pledged to acquire the balance for $5.75 per share, comprised of $3.57 in cash and $2.18 in shares of a newly listed company to be named Nickel 28 Capital Corp.
However, after extensive consultations with shareholders of Cobalt 27, the two companies have agreed to what they describe as significant improvements in the new agreement, including:
An increased cash consideration of $4 per share, up from $3.57, representing an additional $30 million in cash to Cobalt 27 shareholders.
A reduction in the cash change of control payments for management under their existing entitlements by US$7.13 million, representing a 46% crease. The balance of entitlements will instead by satisfied by 4.8 million shares of Nickel 28 Capital Corp., calculated based on the implied value per share of Nickel 28 of $1.92 per share.
A 50% reduction in the termination fee payable to Pala in the event of a superior proposal from $15.5 million to $7.75 million.
Pala’s interest in Nickel 28 will increase to 9.9% from 4.9%, a move that aims to demonstrate confidence in the ongoing prospects of Nickel 28. The new arrangement continues to provide that Pala will pay Cobalt 27’s net debt, leaving Nickel 28 with no corporate debt and funding of US$5 million of cash upon closing.
Meanwhile, a meeting that will allow shareholders of Cobalt 27 to consider the arrangement has been postponed and rescheduled to October 11, 2019 at 10:00 am (Toronto time).
On Wednesday, Cobalt 27 shares advanced on the news, rising 1.6% or $0.065 to $4.22. The shares are trading in a 52-week range of $3.27 and $6.90.
Owner of the world’s largest cobalt stockpile, Cobalt 27 has established itself as an investment vehicle that offers exposure to the metals that are key to the production of electric vehicles and battery energy storage. It recently acquired a cobalt stream on the Voisey’s Bay nickel mine in Labrador.
The company recently added to its portfolio through the friendly acquisition of Australian-listed Highlands Pacific Ltd. [HIG-ASX], a move that Cobalt 27 said enables it to begin generating cash flow.
Highlands’ primary assets include an 8.56% stake in the producing Ramu mine and a 20% interest in the Frieda River copper-gold project. Both are located in Papua New Guinea.
“It is also clear that nickel will be an increasingly critical component of the electric battery revolution, and the creation of Nickel 28 provides shareholders with significant incremental value and continued exposure to the strong fundamentals of battery metals,” Cobalt 27 Chairman and CEO Anthony Milewski has said.
Under the agreement, certain assets of Cobalt 27 will be transferred to Nickel 28, including:
An 8.56% joint venture interest in Ramu, a producing, long life, low-cost nickel-cobalt mine.
Royalites relating to the Dumont, Turnagain, Flemington, Nyngan, Triangle, Rusty Lake, Professor & Waldman, North Canol and Sunset properties.
Certain equity interests, including the 7.4% interest in Giga Metals Corp. [GIGA-TSXV]
US$5 million in cash to provide for working capital.
As a result, Nickel 28 will continue to provide shareholders with exposure to the electric vehicle market through nickel and cobalt exposure, the companies said.
Cobalt 27 leadership team will continue as the board and management of Nickel 28.
The transaction is subject to the approval of Cobalt 27 shareholders by a two-thirds vote (and a majority vote excluding votes of Pala and certain other interested persons).