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A $143 million takeover offer that gave the former CEO and chairman of zero-waste recycler Close the Loop (ASX: CLG) the confidence to resign has toppled over after the "urban miner" was unable to reach an agreement with its suitor Adamantem Capital.
"The indicative proposal involved considerable complexity and the parties were unable to reach alignment on the commercial terms by which a successful transaction could be agreed and executed. Accordingly, discussions between the parties have ceased," Close the Loop reported in an ASX announcement today.
"Close the Loop remains confident of delivering on its strategic plan as a standalone entity, including capturing the significant global growth opportunity in IT refurbishment.
"Notwithstanding, the board is committed to maximising shareholder value and as such will continue to assess any future change of control transaction proposals if received."
Investors had already soured on the deal's prospects after the exclusivity period for discussions was extended but failed to deliver a result.
CLG shares eroded by 20 per cent over the course of last week after Close the Loop reported that due diligence and discussions were ongoing, and that binding transaction documentation had not been executed, leading to a termination of negotiation exclusivity.
At the time of writing CLG shares have plunged a further 40 per cent this morning to 10.5 cents per share, below levels seen prior to Adamantem's indicative offer at 27 cents per share on 19 November.
Just days after Adamantem lobbed its indicative bid in November, Close the Loop's then-CEO Joe Foster and chairman Greg Toll announced their resignations so the group could recruit a US-based chief executive and an "IT knowledgeable ASX chairman”.
Foster was a co-founder of O F Packaging, a Victorian company that merged with Melbourne-based Close the Loop - originally the world's largest take-back provider of ink and toner cartridges - as part of an initial public offering (IPO) in December 2021.
The deal created an end-to-end powerhouse for hard-to-recycle materials, combining product design and manufacturing. From e-waste to cosmetics to soft plastics, the group has an extensive resource recovery operation spanning Australia, the USA and Europe, and a packaging arm that operates in both Australia and South Africa.
Foster, who had been with O F Packaging and its later iteration for nearly 27 years at the time of his abrupt departure, also led a "transformational acquisition" of Texas-based ISP Tek Services in April 2023.
His resignation coincided with a shift in geographical focus towards North America, but today's announcement reveals it has not been smooth sailing on the continent, including delays for the opening of a new IT refurbishment plant in Mexicali, Mexico, just over the border from California.
In June last year the group forecast the facility would be up and running by October 2024.
"Following the review of recent information received from the various business units, the expectation is that 1H25 revenue will be broadly in line with the prior corresponding period, however EBITDA will be in the range of $11m-$13 million due to several factors," Close the Loop stated.
"These factors include a temporary unfavourable shift in business mix and a delay in the opening of the Mexicali facility. The company is actively addressing these short-term challenges and expects resolution in the coming months."
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