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Metalla Royalty & Streaming (TSXV: MTA) and Nova Royalty (TSXV: NOVR) have entered into a merger that would position the combined business as an “industry-leading” intermediate royalty company.
Pursuant to a Sept. 7, 2023 agreement, Metalla will acquire Nova in an all-share transaction based on a 0.36:1 share exchange ratio. This equates to a consideration of C$1.90 per Nova share with an implied premium of 25%, based the stocks’ closing prices on the day. The purchase price gives Nova a total equity value of C$190 million on a fully-diluted basis.
Upon completion, Metalla and Nova shareholders would own approximately 60% and 40% of the combined entity, respectively.
Shares of Metalla were down 12.7% by 2:50 p.m. in Toronto, for a market capitalization of C$244.1 million. Nova Royalty gained 4.6% at $1.59 per share, with a market capitalization of C$147.5 million.
The new royalty company is expected to boast a portfolio of 105 high-quality royalties and streams with upwards of two decades of sustainable growth, according to Metalla. Nearly all the assets are in tier-one jurisdictions (Canada, US, Australia) and Latin America, with top ten assets by consensus net-asset-value having a peer-leading average mine life of 20 years and an average operator market capitalization of C$13 billion.
Both Metalla and Nova believe that the combined company will “benefit from the strong growth in cash flows from the resulting high-margin, high-growth, inflation-resilient and diversified portfolio.”
“We are very excited about the combination of these businesses. This merger represents a transformative moment for both companies and will lay a clear, low-risk path to becoming an intermediate royalty company,” Metalla CEO Brett Heath said in a news release.
“In May 2023, we launched a robust strategic process to explore and review all the options available to Nova that would maximize shareholder value,” Hashim Ahmed, interim CEO of Nova, added. “After evaluating various options presented during the process, it was clear that this transaction represents a significant value creation opportunity and the best way forward for Nova shareholders.”
Concurrent with the business combination, Metalla’s strategic partner Beedie Capital has committed to an equity investment of C$15 million and increased the company’s existing convertible loan facility to C$50 million (for total commitment of $65 million). This, according to Heath, would result in approximately C$35 million of available liquidity to fund its growth.
Following the investment, Beedie would hold an approximate 9.7% stake in the combined company on a non-diluted basis.
“The combination of Metalla and Nova is a natural and strategic fit that we feel amplifies the opportunity beyond what either could achieve on its own. The combined entity has a highly unique portfolio of royalties in key gold and copper projects in top jurisdictions. We believe this will create organic cash flow growth for years to come, while maintaining substantial option value across the broader portfolio,” David Bell, managing director at Beedie Capital, commented.
