The pace of mergers and acquisitions has been picking up speed.
The post Why the Firefly Resources (ASX:FFR) share price just leapt 20% higher appeared first on The Motley Fool Australia. –
The Firefly Resources Ltd (ASX: FFR) share price just leapt 20% to 12 cents per share.
Firefly Resources’ share price closed at 10 cents per share on Thursday. That’s when the ASX gold explorer entered a trading halt pending today’s joint announcement with Gascoyne Resources Ltd (ASX: GCY).
Gascoyne also just exited a trading halt enacted on Friday, with its shares currently down 1%, having earlier posted gains of 8% shortly after the announcement.
What did Gascoyne and Firefly announce?
The Firefly Resources share price shot higher after the 2 ASX gold miners announced that they’ve agreed to merge.
Under the agreement, Gascoyne will acquire 100% of Firefly Resources’ shares held at the Scheme record date in exchange for 0.34 Gascoyne shares. According to the release that represents an implied offer price of 14.5 cents per share, based on Gascoyne’s 5-day volume weighted average price (VWAP).
The companies said the merger will create a “leading regional gold production and development business” in the Murchison Region of Western Australia. The merger is unanimously supported by Firefly’s board.
Firefly and Gascoyne also unveiled their plans to demerge their copper-gold and lithium projects. These assets will come under the control of a new resource explorer, which will be called Firetail Resources Limited. Firetail will then apply to be listed on the ASX.
Commenting on the merger agreement, Richard Hay, Gascoyne’s CEO said:
The merger with Firefly will consolidate approximately 1,200 square kilometres of the Yalgoo and Dalgaranga greenstone belts under single ownership, significantly enhancing the exploration upside potential with over 100 high quality targets. Any discoveries can quickly be brought into production at Gascoyne’s high quality, low cost Dalgaranga processing plant.
Firefly’s CEO Simon Lawson added:
Firefly shareholders will hold approximately 32% of the merged entity, with the transaction providing an opportunity for immediate value realisation at an attractive premium. Through their holdings in the enlarged Gascoyne, Firefly shareholders will stand to benefit from the re-rating that we would expect to flow from the creation of a larger gold company with an increased mine life and enhanced production profile.
Following the merger, Firefly estimates the combined company will have a pro forma market cap of $159 million. It will continue to trade as Gascoyne Resources, with the ticker GCY.
Lawson will join the Board of Gascoyne as a non-executive-director while Hay will continue in his role as CEO.
Firefly Resources share price snapshot
Up 20% following the merger announcement, Firefly Resources’ share price remains down 37% year-to-date.
Over the past 12 months, however, the Firefly Resources share price is up an impressive 300%.
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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.