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Hancock Prospecting's Rinehart acquires big stake in Azure amid takeover drama

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2023-10-30

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In the span of a month, Gina Rinehart and Hancock Prospecting have once again acquired a significant shareholding, this time in Australian lithium company Azure Minerals (ASX:AZS), which is currently under a foreign takeover offer. Rinehart and Hancock Prospecting previously secured a 19.9% stake in Liontown Resources, thwarting a $6.6 billion offer from US group Albemarle.

This week, the partly Chinese-controlled SQM and Azure agreed to a $1.6 billion takeover at $3.52 per share, leading to a substantial increase in Azure's share turnover. Over 81 million shares were traded on Thursday, followed by another 26 million on Friday, accounting for nearly 25% of Azure's issued capital.

Hancock Prospecting spent around $1.2 billion to build its Liontown stake and has invested approximately $300 million in its 18.3% stake in Azure. Azure's appeal lies in its 60% ownership of the promising Andover lithium discovery in the Pilbara region.

Hancock revealed its stake just before 6 pm on Friday, confirming market rumors. In a brief statement, Hancock expressed its intention for a long-term investment in Azure.

SQM held 19.9% of Azure and obtained approval from German investor Delphi, which owned 9% of Azure, resulting in a combined stake of around 29% for the Chilean group. Billionaire prospector Mark Creasy, with a 13% stake in Azure, remains a key player.

SQM and Azure have agreed to a scheme of arrangement for SQM to acquire 100% of Azure shares at $3.52 per share. Simultaneously, SQM has launched an off-market takeover bid at $3.50 per share as a backup plan. SQM's offer is subject to limited conditions, such as approval from the Foreign Investment Review Board (FIRB), without financing, due diligence, or a minimum acceptance condition.

A stand-off now exists as the scheme of arrangement includes conditions that could make it challenging for Hancock to proceed further without launching a full bid. For the scheme of arrangement to proceed, no shareholder except SQM can acquire more than a 19% interest in Azure. If such an acquisition occurs, it triggers a condition-light off-market takeover at $3.52 per share, allowing the deal to proceed even with a competitive investor on the horizon.

Given the early stage of development for Andover, SQM can afford to wait and support exploration. With a blocking stake of 18.3%, SQM faces minimal risk from Hancock Prospecting at this point. Rinehart's company could still engage with Mark Creasy to acquire his 40% stake in Andover, followed by his 13%, potentially forcing SQM's hand regarding the off-market offer.

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