Pilbara Minerals shares fall with analysts downbeat on Latin Resources buyout
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More news: Pilbara Minerals shares lowered in morning trade after agreeing to buy ASX minnow Latin Resources, which saw its shares rocket 50%.
Pilbara shares were down 4.7% to $2.72 by midday AEST, as Latin shares soared 50% to 18 cents.
RBC Capital Markets analyst Kaan Peker said the deal would "likely weigh" on Pilbara shares today, with the transaction representing a "significant" premium to Latin's 30-day volume-weighted average price.
Peker noted that given the geographical spread of assets between Brazil and Australia, and with first production at the Salinas lithium project slated for 2026, he sees "limited operational synergies" and expects the deal to be earnings dilutive in the near term.
Pilbara Minerals to acquire Latin Resources
The news: Pilbara Minerals has agreed to buy ASX minnow Latin Resources, widening the lithium miner's mineral resources by around 20%.
The numbers: The deal will see Pilbara acquire Latin's flagship Salinas lithium project in Brazil, which the company said has the potential to become a top 10 hard rock lithium operation by production globally.
Pilbara said Salinas could add around 20% to the miner's mineral resources and contribute up to 30% of pro-forma steady state production.
Latin shareholders will receive 0.07 new Pilbara shares for each Latin share held, and will own around 6.4% of Pilbara's shares upon completion of the deal.
Based on Pilbara's last closing price of $2.85, the transaction implies a value of around 20 cents per Latin shares, representing a 57% premium to Latin's 10-day volume-weighted average price of 127 cents per share.
The context: Latin's board unanimously recommended the deal in the absence of a superior proposal emerging and subject to an independent expert concluding that the offer is in the best interests of Latin shareholders.
All the directors of Latin's board, who hold a combined 4.8% stake in the company, said they intend to vote in favour of the takeover. Latin's largest shareholder José Luis Manzano, who holds 7.9% voting power, has also confirmed that he will vote in favour of the scheme.
Latin's managing director Chris Gale has agreed to join Pilbara as a consultant for 12 months to provide leadership continuity with key stakeholders.
What they said: "I have spent time at Pilbara Minerals' Pilgangoora mine, met with the Pilbara Minerals team and I'm in no doubt that Pilbara Minerals' expertise in lithium mining will be an enormous benefit not only to Latin Resources and its 100%-owned Brazilian subsidiary, Belo Lithium, but to Brazil itself," Gale said.
Pilbara CEO Dale Henderson said: "This acquisition is on-strategy, diversifying the business with what we believe is a counter-cyclical, accretive extension that further builds out Pilbara Minerals' position as one of the leading lithium materials suppliers globally".
"The acquisition will deliver our second 100% owned, Tier 1, hard rock lithium asset, which is expected to be low-cost and accretive for our shareholders," he said. "It provides Pilbara Minerals with optionality to sequence new supply and diversity into new growth markets for lithium such as Europe and North America."
The sources: ASX announcement, RBC Capital Markets research
