- Acquisition to be completed at a 66% premium to current
share price
- Offer of C$5.75 per share,
comprised of C$3.57 in cash plus
C$2.18 in shares of the newly
established Nickel 28
- Nickel 28 will provide shareholders with continued direct
exposure to nickel and cobalt
TORONTO, June 18, 2019 /CNW/ - Cobalt 27 Capital Corp.
(TSXV: KBLT) ("Cobalt 27" or the "Company")
and Pala Investments Limited ("Pala") are pleased to
announce that they have entered into an agreement (the
"Arrangement Agreement") pursuant to which Pala will
acquire 100% of Cobalt 27's issued and outstanding common shares,
other than the approximately 19% that Pala already owns, for total
consideration of approximately C$501
million on a 100% basis. Under the terms of the transaction
Cobalt 27 shareholders will receive C$5.75 per common share, comprised of
C$3.57 in cash plus C$2.18 in shares of a newly listed company to be
named Nickel 28 Capital Corp. ("Nickel 28") (collectively,
the "Consideration").
Nickel 28 will be created to hold Cobalt 27's joint venture
interest in Ramu, a low-cost, long-life producing nickel-cobalt
mine, its royalty portfolio on future projects including the
Turnagain royalty, a royalty over one of the largest undeveloped
nickel sulphide projects globally, the Dumont royalty, a
shovel-ready nickel project in Canada and certain equity positions including
in Giga Metals Corporation. Nickel 28 will be funded with
US$5 million in cash at inception
with no corporate debt. The Company's management believes Nickel 28
will continue to provide shareholders with direct exposure to the
electric vehicle market through nickel and cobalt exposure. Pala
will retain a 4.9% interest in Nickel 28, and the current Cobalt 27
leadership team will continue as the board and management of Nickel
28.
The Company believes this is a highly attractive proposal for
shareholders of Cobalt 27 as:
- The total consideration of C$5.75
represents a 66% premium to Cobalt 27's closing price on the TSX
Venture Exchange (the "TSX-V") on June 17, 2019 of C$3.47 and a 46% premium to Cobalt 27's 20-day
volume weighted average trading price on the TSX-V of C$3.95 as at the same date; and
- Shareholders will retain exposure to the high-quality asset
portfolio of Nickel 28.
Anthony Milewski, Chairman and
CEO of Cobalt 27, commented: "We believe this is a highly
compelling offer for Cobalt 27, as the transaction provides
shareholders with a large upfront premium. 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."
Stephen Gill, Managing Partner of Pala commented:
"As a long-term investor, this transaction is aligned with our
strategy of building sustainable value chains around the raw
materials that support a changing economy. We look forward to
remaining a supportive shareholder of Nickel 28, as it goes forward
with a clean balance sheet to continue building its asset base, in
particular, by leveraging its recently acquired exposure to the
producing Ramu nickel-cobalt mine".
Terms of the Transaction
The transaction will be carried out pursuant to the Arrangement
Agreement under a court-approved statutory plan of arrangement (the
"Arrangement") governed by the Business Corporations
Act (British
Columbia). Under the Arrangement Agreement, Pala will
acquire all of the issued and outstanding common shares of Cobalt
27, other than the approximately 19% that Pala already owns. Each
common share of Cobalt 27 acquired will be exchanged for:
- C$3.57 in cash; and
- One new common share of Nickel 28 with an implied value of
C$2.18 per share.
Pursuant to the Arrangement, certain assets of Cobalt 27 will be
transferred to Nickel 28, the shares of which will be distributed
to Cobalt 27 shareholders as part of the Consideration. Effective
on closing of the Arrangement, the following key assets will be
transferred to and held by Nickel 28:
- 8.56% joint venture interest in Ramu; a producing, long life,
low-cost, nickel-cobalt mine;
- royalties relating to the Dumont, Turnagain, Flemington,
Nyngan, Triangle, Rusty Lake,
Professor & Waldman, North Canol and Sunset properties;
- certain equity stakes, including approximately 7.4% of Giga
Metals Corporation; and
- US$5 million of cash to provide for initial working
capital.
In addition, the approximately US$6
million of cash previously funded in escrow by Cobalt 27 to
satisfy certain contingent payment obligations related to the
acquisition of Highlands Pacific Limited will be transferred to
Nickel 28 if the contingent consideration does not become payable
pursuant to the terms of such transaction.
Following the completion of the Arrangement, Pala will retain a
4.9% interest in Nickel 28.
Transaction Value Highlights for Cobalt 27
Shareholders
- Premium valuation: The offer price represents a
significant premium to the share price of Cobalt 27 based on the
total consideration of C$5.75 per
share; the cash component of that consideration being C$3.57 per share itself represents a
premium.
- Significant cash component delivers immediate liquidity and
value certainty: The transaction provides immediate liquidity
and value certainty to shareholders at a time of significant market
volatility and amidst an uncertain near-term outlook for the global
economy. In particular, the transaction provides a significant cash
component.
- Nickel 28 to provide Cobalt 27 shareholders with continued
exposure to the electric vehicle revolution via its concentrated
portfolio of nickel and cobalt interests.
- Improved exposure to high-quality assets: Nickel 28 will
provide shareholders with exposure to high-quality assets including
the low-cost, long-life Ramu joint venture. The asset portfolio of
Nickel 28 will comprise a number of high-quality royalties, which
have potential to add substantial cash flow once the underlying
assets reach production. The creation of Nickel 28 is also
accretive to shareholder pro-rata ownership of the assets held by
Nickel 28, as Pala will retain a 4.9% interest, versus the
approximate 19% it currently holds of Cobalt 27.
- Potential to unlock significant value through a well-funded
Nickel 28 and enhanced exposure to nickel. Nickel 28
shareholders will benefit from a broad portfolio of nickel focused
assets, a strong balance sheet and the proven track record of
Cobalt 27's management team. With the implied value of Nickel 28
shares in the offer calculated based largely on the acquisition
values paid by Cobalt 27 for each asset, plus a strong balance
sheet with no corporate debt, the Cobalt 27 management team sees
significant potential upside for shareholders of Nickel 28.
Other Matters
Cobalt 27's board of directors (the "Board") established
a special committee of independent directors (the "Special
Committee") to review and oversee the negotiation of the
Arrangement Agreement. The Special Committee obtained a fairness
opinion from its independent financial advisor to the effect that,
subject to the assumptions, qualifications and limitations
contained therein, as at June 17,
2019, the Consideration is fair, from a financial point of
view, to the shareholders of Cobalt 27 (other than Pala). The
Special Committee unanimously recommended to the Board that the
Arrangement Agreement be approved.
The Board obtained a fairness opinion from Cobalt 27's financial
advisor to the effect that, subject to the assumptions,
qualifications and limitations contained therein, as at
June 17, 2019, the Consideration is
fair, from a financial point of view, to the shareholders of Cobalt
27 (other than Pala) (the "Company Fairness Opinion"). The
Board has unanimously determined, based on, among other things, the
recommendation of the Special Committee and the Company Fairness
Opinion, that the Arrangement Agreement is in the best interests of
Cobalt 27 and its shareholders and will recommend that Cobalt 27
shareholders vote in favour of the Arrangement. Directors and
senior officers of Cobalt 27 holding in aggregate approximately 2%
of the issued and outstanding common shares of Cobalt 27 have
entered into voting and support agreements with Pala, pursuant to
which they have agreed to vote their shares in favour of the
Arrangement.
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) at a meeting
expected to be held in August 2019.
The transaction is expected to close by late August 2019 following receipt of all shareholder,
court, regulatory and TSX-V approvals.
Pursuant to the terms of the Arrangement Agreement, Cobalt 27 is
subject to customary non-solicitation covenants and has the benefit
of customary fiduciary-out provisions. In the event a superior
proposal is made to Cobalt 27, Pala has a 5-business-day right to
match such proposal, and under certain circumstances where the
Board changes its recommendation or the Arrangement Agreement is
terminated, Cobalt 27 has agreed to pay a termination fee of
C$15.5 million to Pala. In certain
other circumstances where the transaction is not completed, Cobalt
27 has agreed to reimburse Pala's expenses up to an amount of
C$1.5 million.
Advisors and Counsel
Cobalt 27 has engaged Scotiabank and Regent Advisors as its
financial advisors and Stikeman Elliott LLP as its legal advisor in
connection with the Arrangement. The Special Committee engaged TD
Securities Inc. to provide an independent fairness opinion in
connection with the Arrangement.
Pala has engaged Goldman Sachs as its financial advisor and
Torys LLP and White & Case LLP as its legal advisors in
connection with the Arrangement.
Pala has mandated and received financing commitments from
Société Generale and ING Capital LLC as Joint Lead Arrangers for
loan facilities related to the transaction.
About Cobalt 27
Cobalt 27 Capital Corp. is a leading battery metals streaming
company offering exposure to metals integral to key technologies of
the electric vehicle and energy storage markets. Cobalt 27 holds an
8.56% joint venture interest in the long-life, world-class Ramu
mine which currently delivers near-term attributable nickel and
cobalt production. Cobalt 27 also manages a portfolio of 11
royalties. Cobalt 27 also owns physical cobalt and a cobalt stream
on the Voisey's Bay mine.
About Pala
Pala is an investment company focused on the raw materials value
chains that drive the global economy. Pala's team has extensive
experience, with a strong track record of successful investments
and value creation. Pala seeks to assist companies by providing
strategic support and innovative solutions in development, growth
and turnaround situations. Pala invests across all raw materials as
well as the associated businesses critical to building sustainable
value chains for the future, including extraction, processing,
recycling, logistics and technology.
Additional Information
Further information regarding the Arrangement will be included
in the information circular that Cobalt 27 will prepare, file, and
mail in due course to shareholders in connection with its special
meeting to be held to consider the Arrangement. The Arrangement
Agreement will be filed on the SEDAR profile of Cobalt 27 on the
SEDAR website at www.sedar.com.
None of the securities to be issued pursuant to the Arrangement
Agreement have been or will be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities
Act"), or any state securities laws, and any securities issued
in the Arrangement are anticipated to be issued in reliance upon
the exemption from such registration requirements provided by
Section 3(a)(10) of the U.S. Securities Act and applicable
exemptions under state securities laws. This news release does not
constitute an offer to sell or the solicitation of an offer to buy
any securities.
The C$2.18 implied value of each
Nickel 28 share is based on the value ascribed to each asset by
Cobalt 27, being the price paid at the time each was acquired with
the exception of the Dumont Royalty which is valued at 0.4x NAV at
8% cost of capital based on the Dumont 2019 Feasibility Study as
disclosed by Royal Nickel Corporation on May
30, 2019, plus cash on balance sheet and market value of
shares held.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This news release contains certain information which constitutes
'forward-looking statements' and 'forward-looking information'
within the meaning of applicable Canadian securities laws. Any
statements
that are contained in this news release that are not statements
of historical fact may be deemed to be forward-looking statements.
Forward looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "potential", "believe",
"intend" or the negative of these terms and similar expressions.
Forward-looking statements in this news release include, but are
not limited to statements with respect to: the anticipated benefits
associated with the Arrangement; the business and assets (including
their implied value) of Nickel 28 and its strategy going forward;
future prices of cobalt, nickel and other commodities; statements
pertaining to the adoption of electric vehicles and battery storage
globally; the timing for the completion of the Arrangement; the
Consideration to be received by shareholders of Cobalt 27, which
may fluctuate in value due to Nickel 28 common shares forming part
of the Consideration; the composition of the future management team
of Nickel 28 and the satisfaction of closing conditions including,
without limitation (i) required Cobalt 27 shareholder approvals;
(ii) necessary court approval in connection with the plan of
arrangement; (iii) termination rights available to the parties
under the Arrangement Agreement; (iv) Cobalt 27 obtaining the
necessary approvals from the TSX-V for the listing of the common
shares of Nickel 28 in connection with the Arrangement; and (v)
other closing conditions, including, without limitation, compliance
by Cobalt 27 and Pala with various covenants contained in the
Arrangement Agreement. In particular, there can be no assurance
that the Arrangement will be completed. Readers are cautioned not
to place undue reliance on forward-looking statements.
Forward-looking statements involve known and unknown risks and
uncertainties, most of which are beyond the Company's control. For
more details on these and other risk factors see the Company's most
recent Annual Information Form on file with Canadian securities
regulatory authorities on SEDAR at www.sedar.com under the heading
"Risk Factors". Should one or more of the risks or uncertainties
underlying these forward-looking statements materialize, or should
assumptions underlying the forward-looking statements prove
incorrect, actual results, performance or achievements could vary
materially from those expressed or implied by the forward-looking
statements.
The forward-looking statements contained herein are made as of
the date of this release and, other than as required by applicable
securities laws, the Company does not assume any obligation to
update or revise them to reflect new events or circumstances. The
forward-looking statements contained in this release are expressly
qualified by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release. No securities regulatory authority has
either approved or disapproved of the contents of this news
release.
SOURCE Cobalt 27 Capital Corp