Champion Iron (ASX:CIA) is closing out the year with a bang, launching a US$289 million cash tender offer for Norwegian iron ore producer Rana Gruber.
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The approach, unanimously supported by Rana Gruber’s board, values the Norwegian company at NOK 79 per share. There’s some runway here for both parties, with any possible deal to close sometime between May and July next year.
Champion expects to fund the deal with equity, debt, and an existing cash kitty. That financing package includes US$100M from a La Caisse placement, US$150M from Scotiabank, and C$325M in cash reserves.
Rana Gruber now has until the end of January to decide whether it wants to proceed with the tender offer – though Champion is positive it will go through.
“The proposed acquisition of Rana Gruber supports our vision to collaborate in decarbonising the steel industry by leveraging [their] quality resources and proven iron ore operations,” Champion’s CEO, David Cataford, said.
“The transaction offers an attractive value proposition,” he continued, “including an expected positive impact on Champion’s financial results.”
Mr Cataford said the ASX-listed company had already tabled “several opportunities” for Rana Gruber should the deal get a tick, including technical cooperation, customer engagement, and asset improvement potential.
Rana Gruber is a long-established iron producer in Mo i Rana, Norway, with mining operations that date back to the 1960s. Champion was particularly interested because Rana Gruber has recently produced more than 1.8 million tonnes per annum of high-grade iron ore and has upgraded part of its production to 65% Fe concentrate.
For the trailing four quarters ending September 30 this year, Rana Gruber had reported profit of NOK 333.5 million, EBITDA of NOK 592.3 million, and an average cash cost of around 565kr per metric tonne produced.
CIA shares head into Monday trade at $6.01 each.
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