Lepidico’s Merger Partner Desert Lion Receives Shareholder approval; Merger Inches Closer

Lepidico Ltd (ASX: LPD) is engaged in exploring as well as development and production of lithium chemicals. Besides, it has proprietary technology including the L-Max® Process to produce lithium carbonate from non-conventional sources, specifically lithium rich mica minerals like lepidolite and zinnwaldite; and the more recent LOH-MaxTM technology, which produces lithium hydroxide from lithium sulphate without by-produce sodium sulphate.

Lepidico has a market capitalisation of ~AUD 93.97 million and around 3.36 billion outstanding shares. The LPD stock closed the trading session, at a price of AUD 0.029, edging up by 3.571% on the previous day’s close of AUD 0.028. Around 12.07 million shares traded the hands of shareholders. In addition, the LPD stock has also delivered good return yields so far. These include a positive 66.72% yield for the last six months and 88.95% yield from year-to-date.

Lepidico, on 22 May 2019, informed the market that its proposed merger partner, Desert Lion Energy Inc had received support agreements, signed by shareholders, which represent ~ 61,292,342 shares, i.e. 58% of the Company’s total shares (issued and outstanding).

Lepidico and Desert Lion Merger Agreement

On 7th May 2019, Lepidico Limited and Desert Lion Energy Inc announced that they had entered into a definitive arrangement agreement, as per which, Lepidico would acquire all the outstanding common shares of Desert Lion for 5.4 Lepidico ordinary shares for every 1 Desert Lion share.

The two parties agreed on an exchange ratio, reflecting either a 38% premium on the closing price of Lepidico and Desert Lion shares on 3rd May 2019 or a 39% premium calculated on the 10-trading day VWAP of the parties’ shares. Desert Lion’s Directors and officers, that together hold 17% of the its issued shares, began voting for and developing support agreements for the transaction.

The strategic rationale behind the transaction was the companies’ shared objective to achieve free cash flow generation soon, by forming a new vertically integrated and scalable lithium chemical business. The merged company will be called Lepidico Ltd. The merger would combine Lepidico’s proprietary metallurgical processing technologies with Desert Lion’s lepidolite assets and a substantial exploration package.

The summary of assets and attributes of both the parties is tabulated below:

Source: Corporate Presentation May 2019

As per the terms of the agreement, on 7th May 2019, Lepidico announced a 1:9 pro-rata renounceable Entitlements Offer to issue ~ 372,908,354 fully paid ordinary shares at $0.029 to raise up to $10.8 million for business integration, new development and growth opportunities, with one free attaching option. The option is exercisable at $0.05 on or before the third anniversary of the date of issue for every two new shares issued under the offer. The prospectus for the offer was lodged on 7th May 2019 with ASIC, and it is scheduled to close on 29th May 2019.

The works are progressing on schedule with the transaction to be finally completed by July 2019-end. Meanwhile, Desert Lion’s shareholder meeting is scheduled to be held on 27th June 2019.

The indicative timetable for merger completion is as follows:

Source: Corporate Presentation May 2019


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