What Are the Key Details of Azure Minerals' Joint Venture with SQM and Hancock?

Azure Minerals' Strategic Move: A Comprehensive Analysis of the Joint Bid Transaction Implementation Deed

Azure Minerals Limited (ASX: AZS), a notable player in the mining sector, has made a significant strategic move by entering a new binding Transaction Implementation Deed (TID) with Sociedad Química y Minera de Chile S. A. (SQM) and Hancock Prospecting Pty Ltd (Hancock). This joint venture, set to reshape the landscape of the industry, proposes a complete acquisition of Azure's shares through a well-structured financial arrangement.

The Essence of the Transaction

The proposed transaction by the joint bidders (SQM and Hancock), through SH Mining Pty Ltd (BidCo), aims to acquire 100% of Azure's shares. This acquisition is outlined in two forms: a scheme of arrangement offering A$3. 70 per Azure share (Scheme Proposal) and an off-market takeover bid at A$3.

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65 per Azure share (Takeover Offer), should the former not succeed.

Replacement of the Original SQM Transaction

This new transaction supersedes the previous SQM transaction announced on October 26, 2023. The original offer included a scheme proposal of A$3. 52 cash per Azure share and a fall-back takeover offer of A$3. 50 cash per share.

Financial Highlights of the Proposal

The Scheme Proposal values Azure at approximately A$1. 70 billion on a fully-diluted equity basis. This represents a considerable premium over previous offers and market valuations, including a 5. 1% increase from the Original SQM Transaction scheme component and over 60% premium compared to Azure's share value before the announcement of the Original SQM Transaction.

Conditions and Approvals Required

The transaction is subject to several conditions, including obtaining approval from Australia’s Foreign Investment Review Board (FIRB), competition law approvals, and the approval of Azure shareholders. Notably, the Takeover Offer lacks a minimum acceptance condition, offering liquidity to shareholders if the Scheme Proposal does not materialize.

Board Recommendation and Shareholder Support

Azure's Board has unanimously recommended the Transaction, contingent on the independent expert's favorable opinion. This recommendation is bolstered by the support from major shareholders, Creasy Group and Delphi Group, who have signaled their intention to back the Transaction.

Possible Alternatives and Fallbacks

In case the Scheme Proposal is not effective by a certain date, and the Takeover Offer is withdrawn or lapses, SQM is obligated to proceed with the takeover offer component of the Original SQM Transaction at A$3. 50 per Azure share.
Strategic Implications and Outlook

Impact on Azure and the Mining Industry

Managing Director Tony Rovira emphasized the transaction's significant value uplift for shareholders, highlighting its positive implications for stakeholders in Andover. This deal not only strengthens Azure's financial standing but also brings together the expertise of Hancock, a leading mining and exploration company, with SQM's resources.

Future Steps and Timelines

An indicative timeline suggests that a Transaction Booklet will be sent to Azure shareholders in mid-February 2024, with a shareholder meeting anticipated in mid-March 2024 to approve the Transaction. If approved, the Scheme Proposal's implementation would follow shortly thereafter.

A Significant Leap for Azure Minerals

This joint bid transaction marks a pivotal moment in Azure Minerals' journey, offering a substantial premium to shareholders and aligning the company with strong industry partners. The meticulous structuring of the deal, with fallback options and shareholder-friendly terms, reflects a strategic approach to corporate growth and stakeholder value creation in the volatile mining sector. The market and industry analysts will closely monitor the progress of this transaction, given its potential to set precedents in the mining industry.

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