(Reuters) - MagIndustries Corp MAA.TO plans to sell itself to China’s Evergreen Industries Group for C$115 million ($120.3 million), capping the Canadian company’s attempts seeking capital to develop its key potash project in Congo.
Companies have been scouting for potash deposits as a rising
population spurs demand for fertilizers, despite limited feasible deposits and high development costs.
The deal with Evergreen could put an end to MagIndustries’ strategic alternative process that began last year. But the deal still requires Chinese government approval, which has generally been hard to come by.
Regulatory hurdles in China had stalled MagIndustries’ partnership talks with China National Complete Plant Import and Export (Complant) 000151.SZ to develop its 1.2 million tonne-a-year Mengo project in Congo.
In February, Taiwan-based TSC Capital also pulled out of a deal to buy a 55 percent stake in MagIndustries for C$185 million, which would have satisfied the equity component needed to build the Mengo project.
Shanghai-based Evergreen, involved in ship building, marine engineering, natural resources and logistics, will acquire all of MagIndustries’ shares for 25 Canadian cents a share, which is a 67 percent premium to the stock’s Tuesday closing price.
Evergreen has over 25,000 workers, according to its website.
MagIndustries shares soared 57 percent in early trade on Wednesday. They were trading up 50 percent at 22.5 Canadian cents, below the offer price — a sign generally seen favorable to a deal.
The stock was the most actively traded stock on the Toronto Stock Exchange with nearly 22.6 million shares changing hands by 0150 ET.
All of the directors and officers of MagIndustries have agreed to tender of all their shares to Evergreen.
MagIndustries, founded in 1997, said the agreement includes a C$3 million termination fee.
BMO Capital Markets is the financial adviser to MagIndustries.
($1 = 0.956 Canadian Dollars)
Reporting by Aftab Ahmed and Abhiram Nandakumar in Bangalore; Editing by Don Sebastian