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Private equity group Adamantem Capital has seized on weakness in the share price of Close the Loop (ASX: CLG) to lob a $143.6 million takeover bid for the Melbourne-based zero-waste operation.
Adamantem Capital, which has extensive interests in the sustainability sector, is offering shareholders 27c per share for full control of Close the Loop which has seen its shares slump from a high of 42.5c in January this year to a low of 16c last month.
Close the Loop’s board has already declared its support for the indicative offer price.
The Sydney-headquartered Adamantem, which has $1.6 billion in assets under management, has put forward an indicative proposal that offers Close the Loop shareholders a cash payment or a mix of cash and shares in the new entity that will acquire the “urban miner”.
The offer price represents a 31.7 per cent premium to Close the Loop’s closing price yesterday of 20.5c, and a 49 per cent premium to the 30-day volume-weighted average price on 15 November 2024. The shares were trading 4.5c higher at 25c at 10.57am (AEDT).
Close the Loop says the scrip component is subject to an aggregate minimum take-up level amongst all shareholders, with the total level of scrip consideration to be scaled back if demand exceeds a maximum scrip roll of 45 per cent of all outstanding shares.
The company has given Asamantem a 20-day exclusive due diligence period to progress to a binding scheme implementation deed (SID).
“Subject to Close the Loop and Adamantem agreeing a SID on terms acceptable to Close the Loop, it is the company’s directors intention to unanimously recommend that shareholders vote in favour of the transaction proposed in the indicative proposal if the consideration is at least 27c cash per share, in the absence of a superior proposal and subject to an independent expert concluding that the transaction is in the best interests of Close the Loop shareholders,” says the company.
The offer price is still above Close the Loop’s IPO issue price of 20c per share in December 2021.
The company, which was founded as the world's largest take-back provider of ink and toner cartridges, merged with fellow Victorian business O F Packaging as part of the ASX listing, establishing an end-to-end powerhouse for hard-to-recycle materials that combines with product design and manufacturing.
Close the Loop, which has operations on five continents with a corporate goal of “zero waste to landfill”, collects and refurbishes products such as laptops, printers, teleconferencing equipment and gaming devices and provides sustainable packaging, which allow for greater recoverability and recyclability.
The company posted an 8.8 per cent lift in net profit to $11.16 million in FY24 as revenue surged 57 per cent to $212.9 million.
Acquisitions have helped Close the Loop grow its business since listing on the ASX, with the latest being a $100 million deal last year for Texas-based refurbished electronics business ISP Tek Services, which has since been rebranded Close the Loop Renew Solutions.
While Close the Loop’s FY24 performance was underpinned by strong growth in the resource recovery businesses, the company’s packaging division failed to meet growth expectations.
The company also reported a 9 per cent fall in revenue from its Australian operations, leading to a 6 per cent fall in EBITDA. Close the Loop’s Australian business represents 32 per cent of group revenue and 18 per cent of EBITDA.
Close the Loop points out today that there is no certainty that Adamantem’s due diligence will lead to an offer that will be acceptable to the board.
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