Sayona and Piedmont shares plummet on merger raise
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The news: Shares in ASX-listed lithium producers Sayona Mining and Piedmont Lithium both dived in morning trade after Sayona received commitments for a $40 million equity raising to support an all-stock merger with Piedmont.
The numbers: Sayona (-9.2%) and Piedmont (-8.1%) were both down by 11:30am AEDT, having agreed the proposed merger on Tuesday, with Sayona due to become the parent entity 'MergeCo'.
Sayona's $40 million unconditional placement was conducted at an offer price of 3.2 cents per share, representing an 8.7% discount to its five-day volume-weighted average price of 3.5 cents.
In addition to the unconditional placement, Sayona will launch a conditional placement to raise around $69 million through the issue of 2.16 million new shares in MergeCo, also at 3.2 cents per share. The conditional placement has unanimous support from Sayona's board but still requires the approval of its shareholders.
The context: Sayona said the equity raise will give the merged company "significant balance sheet strength and flexibility" and enable it to "progress value-accretive growth opportunities across its diverse project suite".
Macquarie called the proposed merger a "win-win" and upgraded both stocks to 'neutral'. It also raised both company's target prices, with Sayona lifting 100% to 4 cents and Piedmont's up 91% to 2.1 cents.
Macquarie analysts said both companies were "feeling the pressure" from subdued lithium prices, but the merger allows the removal of the companies' offtake agreement at Sayona's flagship North American Lithium (NAL) operation, which is value accretive.
With additional capital and an unconstrained operation, NAL could undergo brownfield expansion which would yield lower cash costs, they said.
What they said: "We are very pleased with the level of support shown by high quality investors, with the strong demand received representing a clear endorsement of the proposed merger combination," Sayona managing director Lucas Dow said.
"By combining with Piedmont and delivering a well-supported financing package, we are creating a premium global lithium hardrock production and development business."
The sources: ASX announcement, Macquarie research
