Australian nickel-lithium miner IGO Ltd said on Tuesday its A$1.1 billion ($829.29 million) takeover of nickel producer Western Areas could fail after an independent expert concluded that the offer was “neither fair nor reasonable”.
The potential collapse of the deal follows an unprecedented spike in nickel prices, as Russia’s invasion of Ukraine hit a huge short bet made by Tsingshan Holding Group, one of the main producers of nickel in the world, exacerbating market volatility.
It’s also a blow to IGO, which is looking to capitalize on the growing demand for raw materials used to make batteries for electric vehicles. It had bought a $1.4 billion stake in the Australian assets of Tianqi Lithium in June.
The A$3.36 per share cash deal for Western Areas was completed in December last year, but IGO said last month that recent price volatility would delay the acquisition.
IGO said on Tuesday it understood Western Areas’ independent expert had concluded its offer was not in the best interests of shareholders, while noting that it had neither received nor reviewed the draft report.
IGO also reiterated its earlier position that its assessment of the deal was based on its long-term view of the nickel market and that this had not materially changed.
He added that while he would weigh all options regarding the deal, he would “remain disciplined” in the deal he is pursuing.
IGO shares fell 3.8% in early trading, their biggest intraday decline since March 15.
Shares in Western Areas were halted pending an announcement related to the deal. The company did not immediately respond to a request for comment.
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