The Minotaur Exploration Ltd (ASX: MEP) share price has been an exceptionally strong performer on Wednesday.
In morning trade, the mineral exploration company's shares are up 46% to 19 cents.
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Why is the Minotaur Exploration share price rocketing higher?
Investors have been bidding the Minotaur Exploration share price higher today after it revealed plans to merge with Andromeda Metals Ltd (ASX: ADN).
According to the release, the two parties have entered into a bid implementation agreement (BIA), pursuant to which Andromeda will acquire Minotaur by way of an off-market takeover offer.
Andromeda has offered 1.15 Andromeda shares for every Minotaur share. Based on a five-day volume weighted average Andromeda share price of 18.1 cents, this implies a value of $0.208 per share.
This represents a 59.8% premium to the Minotaur Exploration share price at yesterday's close and values the company at $108 million.
Why merge?
The release explains that once fully implemented, Andromeda will consolidate 100% ownership of both the Great White Kaolin Project and the Natural Nanotech business via the acquisition of Minotaur's current 25% and 50% respective joint venture interests.
Management believes this will deliver a simplified and streamlined ownership and will enable the design, funding mix and timetable for the development of the Great White Kaolin Project.
It will also enable enhanced development and commercialisation of any future intellectual property from Natural Nanotech. This includes any new technology created for halloysite applications and uses, such as battery technology, water purification, and carbon capture
The Minotaur Board of Directors and several of Minotaur's largest shareholders intend to accept the offer. The Board also unanimously recommends that shareholders do the same. This is in the absence of a superior proposal.
Demerger
In addition, Minotaur revealed that it intends to demerge its existing copper and gold exploration assets through its subsidiary, Breakaway Resources.
This will be undertaken via a pro-rata in specie distribution of Breakaway shares to Minotaur shareholders.
Management notes that the demerger enables Minotaur shareholders to retain full exposure to the value and the potential upside of these assets and the benefit of Minotaur's highly credentialled board and management team in a clearly focused exploration company which is intended to be listed on the ASX.
Despite today's gain, the Minotaur Exploration share price is now actually only trading flat in 2021.
