In a significant development for the shareholders of Alpha Lithium Corporation (NEO: ALLI), Caravel Capital Investments, a major shareholder of the company, has issued an open letter endorsing Tecpetrol’s revised offer to acquire Alpha Lithium for $1.48 per share in cash.
Caravel Capital, collectively with its principals, owns over 4,500,000 common shares of Alpha Lithium Corp, making them a substantial voice in the ongoing negotiations.
The open letter, signed by Glen Gibbons, PM of Caravel Capital Investments Inc., unequivocally supports Tecpetrol’s revised offer and encourages fellow shareholders to do the same. The letter emphasizes the belief that Tecpetrol’s revised offer fairly values Alpha Lithium and that shareholders should consider tendering their shares before the looming deadline on October 3, 2023.
Tecpetrol’s revised all-cash offer now stands at $1.48 per share, a substantial increase from the original offer of $1.24 per share. This represents a notable 19% improvement in the value of the offer, providing Alpha shareholders with an enhanced opportunity for value realization.
In May, Alpha Lithium turned down Tecpetrol’s initial proposal of $1.24 per share, characterizing it as “opportunistic” and not aligned with the best interests of its shareholders.
Caravel Capital Investments clarifies that it has no agreements or understandings with Tecpetrol and is simply expressing its views as a major shareholder. The letter highlights the potential substantial losses that Alpha Lithium shareholders may incur if Tecpetrol’s offer expires without success, as indicated by recent trading activity.
The backdrop to this endorsement is a nine-month-long exploration of strategic alternatives by Alpha Lithium for its assets, particularly its Tolillar project in Argentina, which commenced in late 2022. In the spring of 2023, the company’s board formed a fairness committee and enlisted Credit Suisse to assist in the process of soliciting potential buyers for Alpha Lithium assets or the entire company.
The open letter highlighted the key arguments by Caravel Capital Investments, including the idea that Tecpetrol’s revised bid “would remove future financing risks, including substantial future dilution related to advancing Alpha Lithium’s assets into commercial production, given the funding gap of over $700 million.”
Caravel Capital Investments also highlighted that despite an extended period of nine months, Alpha Lithium and its advisors have failed to secure another buyer offering superior terms to Tecpetrol’s revised offer. The open letter also discusses the potential tax implications of an asset sale, arguing that it would result in higher taxes for shareholders compared to Tecpetrol’s offer, which is structured as a capital gain.
“In the unlikely event that ALLI received a C$400 million offer for Tolillar, the distribution of these proceeds would carry its own issues aside from Ottawa’s close scrutiny… Non-eligible dividends are taxed at 47%, not the capital gains rate of 26.5% that Tecpetrol’s offer provides. This would result in approximately $1.17 per share in after-tax proceeds to shareholders, assuming the fully diluted shares outstanding of 212 million,” the firm explained.
“Furthermore, we are skeptical that ALLI management would willingly distribute all or most of the proceeds from such a sale to shareholders, given their desire to continue advancing the company’s Hombre Muerto project. We believe this would not be in shareholders’ best interests,” the firm added.
In publishing its revised offer, Tecpetrol has stated that it does not intend to further extend or modify the offer terms beyond the new bid. Should this improved offer fail to garner sufficient shareholder support, Tecpetrol has asserted its intention to explore other opportunities within the lithium sector.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.