Bacanora Lithium PLC (BCN.L) Possible Offer for Bacanora Lithium plc

POSSIBLE OFFER FOR BACANORA LITHIUM PLC AND AGREEMENT WITH GANFENG INTERNATIONAL TRADING (SHANGHAI) LIMITED

The Bacanora Independent Directors and Ganfeng International Trading (Shanghai) Limited (“Ganfeng”) are pleased to announce that Bacanora Lithium PLC (“Bacanora”) and Ganfeng have entered into an agreement dated 6 May 2021 (the “Offer Agreement”) regarding the terms of a possible cash offer by Ganfeng for the entire issued and to be issued share capital of Bacanora, other than that which it already owns, at a price of 67.5 pence per Bacanora Share (the “Offer Price”) (the “Possible Offer”).

This is an announcement under Rule 2.4 of the Code. It does not represent a firm intention to make an offer under Rule 2.7 of the Code. Accordingly, while Ganfeng has agreed with Bacanora in the Offer Agreement that it will announce a firm intention to make an offer under Rule 2.7 of the Code subject to the Pre-Conditions (as defined in section 3 below) being satisfied or, if applicable, waived as soon as practicable and in any event before 31 December 2021 (or such later date as Ganfeng and Bacanora may agree) (the “Pre-Condition Long Stop Date”), for the purposes of the Code, there can be no certainty that any offer will ultimately be made, even if the Pre-Conditions are satisfied or, if applicable, waived.

In accordance with Rule 2.6(a) of the Code, by not later than 5.00 p.m. on 3 June 2021, Ganfeng must either announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.

This Announcement has been made with the approval of Ganfeng and a further announcement will be made in due course.

1. The Possible Offer

It is intended that the Possible Offer, if made, would be structured as a recommended offer to be implemented by way of a scheme of arrangement under Part 26 of the Companies Act 2016 (the “Scheme”), whereby Ganfeng would acquire the entire issued and to be issued ordinary share capital of Bacanora, other than that which it already owns, at the Offer Price. This would represent a premium of approximately:

· 50.0 per cent. to the Closing Price of 45.0 pence per Bacanora Share on 5 May 2021, being the last practicable date before this Announcement; and

· 54.4 per cent. to the volume weighted average price of approximately 43.7 pence per Bacanora Share for the three-month period ending on 5 May 2021, being the last practicable date before this Announcement .

If, after the date of this Announcement, any dividend and/or other distribution and/or other return of capital is announced, declared, made or paid or becomes payable in respect of the Bacanora Shares, Ganfeng reserves the right to reduce the Offer Price by an amount up to the amount of such dividend and/or distribution and/or return of capital so announced, declared, made, paid or payable.

As a consequence of this Announcement, an Offer Period has now commenced in respect of Bacanora in accordance with the rules of the Code. The attention of Bacanora’s shareholders is drawn to the disclosure requirements of Rule 8 of the Code, which are summarised below.

2. Background

The Bacanora Independent Directors and the Ganfeng Board have held detailed discussions regarding the terms of the Possible Offer and the prospects of Ganfeng increasing its 50% interest in Sonora Lithium Limited, the operational holding company for the Sonora Lithium Project, to 100% through the acquisition of the Bacanora Shares that Ganfeng does not already own.

In connection with the Possible Offer, Ganfeng and Bacanora have agreed an initial form of a firm intention to make an offer announcement pursuant to Rule 2.7 of the Code, which sets out the principal terms and conditions to which the Offer, if made, would be subject, as set out in this Announcement, and the final form of which the parties have agreed to use all reasonable endeavours to conclude as soon as practicable (the “Agreed Form 2.7 Announcement”).

The Bacanora Independent Directors view the Possible Offer to be an attractive proposal which they would expect to recommend to Bacanora Shareholders in the event that Ganfeng releases the Agreed Form 2.7 Announcement at the Offer Price and otherwise on the terms and subject to the conditions to be agreed in the Agreed Form 2.7 Announcement.

Further to Bacanora’s announcement of 5 February 2021, Bacanora and Ganfeng are also pleased to announce that the exercise of Ganfeng’s pre-emptive right to increase its holding in Bacanora following Bacanora’s placing and retail offer of 3 February 2021 has now received the relevant approvals and consents from authorities in the People’s Republic of China. Ganfeng’s subscription for a total of 53,333,333 new Bacanora Shares at the placing price of 45p per share, representing gross proceeds of approximately US$31 million, is therefore expected to complete shortly. On completion, Bacanora will have 384,144,901 shares in issue and Ganfeng will own 28.88% of all Bacanora Shares.

3. Pre-conditions to releasing the Agreed Form 2.7 Announcement

The release of the Agreed Form 2.7 Announcement by Ganfeng is subject to and conditional upon the following pre-conditions (the “Pre-Conditions”) being satisfied (or, where relevant, waived) before the Pre-Condition Long Stop Date:

· the issuance of:

(i) a notice of record-filing from either (a) the People’s Democratic Republic of China’s Provincial Development and Reform Commission or (b) the People’s Democratic Republic of China’s National Development and Reform Commission (as the case may be), in each case to Ganfeng in respect of the Offer;

(ii) written approval from the People’s Democratic Republic of China’s Ministry of Commerce to Ganfeng in respect of the Offer; and

(iii) written approval from the People’s Democratic Republic of China’s State Administration of Foreign Exchange to Ganfeng in respect of the Offer;

((i) to (iii) together, the “Outbound Direct Investment Pre-Condition “);

· the completion of due diligence by Ganfeng, and the Ganfeng Board being satisfied at its sole discretion with the outputs of the due diligence processes (the “Due Diligence Condition”);

· the receipt by Ganfeng of confirmation of the Bacanora Independent Directors’:

(i) intention to provide their unanimous, unqualified and unconditional recommendation to Bacanora Shareholders to vote in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (having been advised by Bacanora’s financial advisers that the financial terms of the Offer are fair and reasonable): (a) on the basis the Offer is at not less than the Offer Price (subject to adjustment, if appropriate, as provided above, in respect of any dividend, distribution and/or return of capital); and (b) subject to the terms and conditions contained in the Agreed Form 2.7 Announcement; and

(ii) agreement that an announcement of the Offer on the terms and subject to the conditions contained in the Agreed Form 2.7 Announcement containing such recommendation may be released;

(together, the “Bacanora Recommendation Pre-Condition”), and

· the receipt by Bacanora of confirmation of:

(i) the Ganfeng Holdco board’s intention to provide its unanimous, unqualified and unconditional recommendation to Ganfeng Holdco Shareholders to vote in favour of an offer by Ganfeng to acquire the entire issued and to be issued share capital of Bacanora, other than that which it already owns, which is: (a) at not less than the Offer Price (subject to adjustment, if appropriate, as provided above, in respect of any dividend, distribution and/or return of capital); and (b) subject to the terms and conditions contained in the Agreed Form 2.7 Announcement; and

(ii) the Ganfeng Board’s agreement that an announcement of the Offer on the terms and subject to the conditions contained in the Agreed Form 2.7 Announcement containing such recommendation may be released;

(together, the “GanfengRecommendation Pre-Condition”).

The Outbound Direct Investment Pre-Condition is not capable of being waived by Ganfeng. Ganfeng, as a Chinese company, is subject to regulations issued by regulatory authorities and governmental bodies of the People’s Republic of China relating to outbound direct investment. As a consequence of these regulations and the requirements of the Code, Ganfeng may release the Agreed Form 2.7 Announcement only once the Outbound Direct Investment Pre-Condition has been satisfied.

Neither the Bacanora Recommendation Pre-Condition (ii) nor the Ganfeng Recommendation Pre-Condition (ii) is capable of being waived. However, the Bacanora Recommendation Pre-Condition (i) may be waived by Ganfeng at its sole discretion, and the Ganfeng Recommendation Pre-Condition (i) may be waived by Bacanora at its sole discretion.

The Due Diligence Condition may be waived by Ganfeng at its sole discretion.

If any of the Pre-Conditions are not satisfied or, if applicable, waived before the Pre-Condition Long Stop Date, Ganfeng will have no obligation to release the Agreed Form 2.7 Announcement. However, there can be no certainty that the Offer will ultimately be made, even if the Pre-Conditions are satisfied or, if applicable, waived. Further information in this respect is provided at section 5 below.

The Bacanora Independent Directors are not obliged to recommend an offer by Ganfeng at the Offer Price. It is therefore possible that the Bacanora Independent Directors could decide against making such a recommendation, notwithstanding that the Due Diligence Condition, the Outbound Direct Investment Pre-Condition and the Ganfeng Recommendation Pre-Condition had been satisfied, in which case Ganfeng would not be required to release the Agreed Form 2.7 Announcement.

4. Expected timetable

It is expected to take up to eight months for the Outbound Direct Investment Pre-Condition to be satisfied, such that in the event that each Pre-Condition has been satisfied (or alternatively waived if capable of waiver), the Agreed Form 2.7 Announcement should be made prior to 31 December 2021.

5. Obligations and undertakings of Ganfeng

Bacanora and Ganfeng have entered into the Offer Agreement in respect of the Possible Offer, the principal terms of which are described below.

The Offer Agreement sets out the process for the satisfaction of the Pre-Conditions before the Pre-Condition Long Stop Date. In particular, Ganfeng has agreed to use all reasonable endeavours to procure the satisfaction of the Due Diligence Condition, the Outbound Direct Investment Pre-Condition and the Ganfeng Recommendation Pre-Condition as soon as practicable and in any event prior to the Pre-Condition Long Stop Date.

If each of the Pre-Conditions is satisfied (or waived by Ganfeng if applicable) before the Pre-Condition Long Stop Date, Ganfeng has agreed to announce a firm intention to make an offer for Bacanora in the final form of the Agreed Form 2.7 Announcement at a price that is not less than the Offer Price (subject to adjustment, if appropriate, as provided above, in respect of any dividend, distribution and/or return of capital) (the “Offer”) within 3 Business Days of satisfaction (or waiver, as the case may be) of the final Pre-Condition.

In particular, Bacanora Shareholders should note that the Offer, if made, would be conditional upon, among other things, the Scheme becoming unconditional and Effective (including its approval by a majority of Scheme Shareholders present and voting (in person or by proxy) representing 75 per cent. or more in the value of the Scheme Shares held by such Scheme Shareholders).

The condition above would not be capable of being waived by Ganfeng.

The Offer would be made on the terms and subject to the conditions set out in the Agreed Form 2.7 Announcement and to be set out in the Scheme Document.

If the Pre-Conditions are satisfied before the Pre-Condition Long Stop Date and Ganfeng fails to comply with its obligation to release the Agreed Form 2.7 Announcement, Ganfeng would not, under the Code, be required to make an offer.

The Offer Agreement will terminate upon:

· the release of the Agreed Form 2.7 Announcement by Ganfeng;

· any of the Pre-Conditions not being satisfied by the Pre-Condition Long Stop Date (or, if applicable, waived); or

· the failure by Ganfeng to release the Agreed Form 2.7 Announcement within 3 Business Days of satisfaction (or waiver, as the case may be) of the final outstanding Pre-Condition in accordance with the Offer Agreement.

In addition, Ganfeng may terminate the Offer Agreement (without liability) if, amongst other events:

· it has received written advice from a reputable law firm that any of the conditions to the Offer contained in the Agreed Form 2.7 Announcement would, if the Agreed Form 2.7 Announcement had been released, be capable of being invoked or would be incapable of being satisfied, or other facts, matters or circumstances exist, such that Ganfeng would be entitled to lapse, withdraw, terminate or not proceed with the Offer;

· before the Pre-Condition Long Stop Date, a Competing Transaction is announced that is recommended or proposed by the Bacanora Independent Directors;

· the Outbound Direct Investment Pre-Condition is not satisfied, in whole or in part, due to a failure by Bacanora to provide any reasonably necessary documentation, information or assistance promptly and within two Business Days following a written request by Ganfeng where it was within Bacanora’s power to provide such documentation, information or assistance, and it was required by any governmental authority for the purposes of the Outbound Direct Investment Pre-Condition; or

· at any time before the release of the Agreed Form 2.7 Announcement, the Bacanora Independent Directors notify Ganfeng that they do not intend to provide a unanimous, unqualified and unconditional recommendation of the Offer.

6. Nature of the Offer Agreement

While Bacanora and Ganfeng have entered into an agreement regarding Ganfeng’s obligations in relation to the Possible Offer, this contractual arrangement between the parties does not represent a firm intention on the part of Ganfeng to make an offer for the purposes of Rule 2.7 of the Code and, for the purposes of the Code, there can be no certainty that any offer will ultimately be made, even if the Pre-Conditions are satisfied or, if applicable, waived.

The entering into the Offer Agreement between Bacanora and Ganfeng is deemed to be a related party transaction pursuant to AIM Rule 13, as Ganfeng currently has a 17.41% interest in Bacanora’s issued share capital. The Bacanora Independent Directors, having consulted with Bacanora’s nominated adviser, Cairn Financial Advisers LLP, consider that the terms of the Offer Agreement are fair and reasonable insofar as Bacanora Shareholders are concerned.

7. Information on Ganfeng and Ganfeng Holdco

Ganfeng is a company incorporated in Shanghai in the People’s Republic of China and a wholly owned subsidiary of Ganfeng Holdco.

Ganfeng Holdco is the world’s third largest, and China’s largest, lithium compounds producer and the world’s largest lithium metals producer in terms of production capacity. Ganfeng Holdco’s operations are vertically integrated, encompassing all critical stages of the value chain, including upstream lithium extraction, midstream lithium compounds and metals processing as well as downstream lithium battery production and recycling. Ganfeng Holdco has one of the most comprehensive product offerings split into five major categories of more than 40 lithium compounds and metals products.

8. General

Appendix 1 contains the definitions of certain terms used in this Announcement. Appendix 2 contains bases and sources of certain information contained in this Announcement.

A copy of this Announcement will be available on Bacanora’s website at https://www.bacanoralithium.com/investor-relations/ and on Ganfeng’s website at http://www.ganfenglithium.com/index_en.html .


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