Todd makes a compelling offer
Todd Corporation has announced its intention to make an offer for Rutila's (ASX:RTA) remaining outstanding shares, proposing to pay A$0.30 in cash per share. Despite our positive view on the project, its relatively high-risk profile and the company’s unfavourable capital structure suggest that the offer may represent an attractive proposition for minority shareholders.
Todd Corporation, a strategic shareholder in Rutila Resources with a 46% interest, has announced its intention to make an offer for the company's remaining outstanding shares. Todd proposes to pay A$0.30 in cash for each Rutila share, which represents a c 100% premium to the undisturbed price. The offer values the company at A$36m in equity and A$84m in enterprise value, taking into account Rutila’s total outstanding debt and accrued interest. It was agreed that the company affiliated with Rutila’s executive chairman, Nicholas Curtis, which controls 23.3% of Rutila, would not participate in the offer.
Overall, despite our positive view on the Balla Balla project, challenging iron ore market conditions coupled with the project’s outstanding permitting work and the company’s unfavourable capital structure (A$46m in short-term debt provided by Todd and secured against Rutila’s interest in the project, as well as only A$1.1m in cash as at the end of March) point to significant execution risks. While Rutila is making good progress on the permitting front (we understand that receipt of the EIA may be imminent), it is likely that the project’s original implementation schedule will slip, with the State Rail Agreement negotiations and BFS completion potentially taking more time and funds. All this suggests that Todd’s offer may represent an attractive proposition for minority shareholders in Rutila.
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