Highly Certain Cash Payment to Alpha Shareholders Otherwise Exposed to Risk as Owners of an Early-Stage Lithium Exploration Company
Pieces of Lithium metal from the Dennis s.k collection. (Credit: Dnn87/Wikipedia)
Tecpetrol Investments S.L. (“Tecpetrol”), a member of the Techint Group, announced today that it intends to make a formal offer (the “Offer”) to acquire all of the issued and outstanding common shares (“Shares”) of Alpha Lithium Corporation (NEO: ALLI) (OTC: APHLF) (German WKN: A3CUW1) (“Alpha” or the “Company”), a Canadian incorporated, headquartered and listed company, for cash consideration of C$1.24 per Share (the “Offer Price”). Tecpetrol intends to make the Offer directly to Alpha shareholders so that they can determine the outcome of their investment.
The Offer follows repeated attempts by Tecpetrol to constructively engage with Alpha. Most recently, Tecpetrol suggested that the parties engage in confidential discussions with respect to the value of the Company to determine whether a mutually agreeable transaction price could be put to Alpha shareholders for their consideration. Tecpetrol reiterated to Alpha that it had an ability to increase the value of its proposal if the parties could reach agreement on a mutually acceptable transaction price. In order to facilitate these discussions, Tecpetrol waived its previous requests for due diligence and exclusivity. Despite the waiver of the due diligence request, which eliminated the need for a non-disclosure agreement, Alpha has continued to insist that Tecpetrol execute a comprehensive non-disclosure agreement that would preclude Tecpetrol from making an offer directly to shareholders and inappropriately limit Tecpetrol’s strategic options, depriving shareholders of the opportunity to choose to accept or reject the Offer.
Tecpetrol is a company incorporated in Spain that is part of the Techint Group, a conglomerate with a strong presence in Canada for more than 20 years, notably through Tenaris, the leading Canadian manufacturer and supplier of steel tubes for the Canadian oil and gas industry. Tecpetrol’s intention, in line with its energy transition strategy, is to responsibly develop these premium lithium assets as part of the integrated Western battery supply chain. The proposal is aligned with Canada’s critical minerals strategy, whose vision is to increase the supply of critical minerals and support the development of the domestic and global value chains for the green and digital economy.
Since its creation, Tecpetrol’s Energy Transition Unit has continually evaluated potential investment, acquisition and other commercial opportunities in energy assets in Argentina and elsewhere that, in line with its energy transition strategy, may be responsibly developed as part of the integrated Western battery supply chain. Tecpetrol recognizes that a key component to building an emerging Western battery supply chain is lithium supply, and Tecpetrol believes that its energy transition strategy is aligned with Western efforts to secure this supply, including the Government of Canada’s Critical Minerals Policy.
On December 1, 2022, Tecpetrol received an unsolicited invitation to participate in an auction process for the sale of Alpha’s interest in the Tolillar Project (the “Sale Process”). It was Tecpetrol’s understanding that the Sale Process was to be broad in nature and include participants from several countries, including China. It was also Tecpetrol’s understanding that the Sale Process was focused on a sale of an interest in the Tolillar Project, rather than a corporate-level transaction involving Alpha, and potentially enable participation in the Sale Process by parties that would likely face significant scrutiny under the national security provisions of the Investment Canada Act and the Critical Minerals Policy.
At the time, Tecpetrol indicated its willingness to participate in the Sale Process, as well as its willingness to explore a potential corporate-level transaction that Alpha shareholders might find more attractive than the asset-level structure put forward in the Sale Process. In Tecpetrol’s view, with the Tolillar Project being Alpha’s sole material mineral property and representing substantially all of its assets, a corporate-level transaction would not only afford shareholders the chance to determine what is best for their investment but also allow them the opportunity to dispose of their entire interest in Alpha and receive full value for their Shares. In addition, based on the information available to Tecpetrol and its advisors, a corporate-level transaction would generally be more tax-efficient for shareholders than a distribution to shareholders of the proceeds resulting from an asset-level transaction, the amount and timing of which distribution is at the discretion of Alpha’s board of directors.
However, Tecpetrol was advised by representatives of the Company that Alpha would not consider a corporate-level transaction. Tecpetrol interpreted this response to indicate that, by exclusively pursuing an asset-level structure, Alpha was prioritizing parties other than Tecpetrol with its Sale Process, which Tecpetrol believed were likely parties that would face significant scrutiny under the Investment Canada Act. As a result, Tecpetrol declined to participate in the Sale Process, but between December 2022 and April 2023 continued monitoring the situation, conducting its due diligence of Alpha and the Tolillar Project based on publicly-available information, and advancing its evaluation of a potential transaction.
By May 2023, Tecpetrol had completed its due diligence of public information. On May 15, 2023, Tecpetrol submitted to Alpha a non-binding proposal (the “Initial Proposal”) to acquire all of the issued and outstanding Shares for a purchase price of C$1.24 per Share. Tecpetrol also offered Alpha an opportunity to discuss the Initial Proposal in additional detail.
On May 16, 2023, Alpha advised Tecpetrol that its board of directors was not willing to consider the Initial Proposal or engage in discussions with Tecpetrol. In addition, Tecpetrol’s financial advisor had a discussion with Alpha’s financial advisor to, among other things, emphasize Tecpetrol’s position as a credible and experienced counterparty with a clear path to closing and Tecpetrol’s willingness to increase the purchase price put forward in the Initial Proposal if it were afforded due diligence access. Tecpetrol’s financial advisor also requested guidance regarding the extent of improvement to the Offer Price that would be necessary to obtain the support of Alpha’s board of directors, but no such guidance was provided.
In light of Alpha’s refusal to consider the Initial Proposal or engage in discussions with Tecpetrol, Tecpetrol believed that shareholders should be made aware of the Initial Proposal and, on May 22, 2023, issued a press release disclosing the key terms of the Initial Proposal.
On May 31, 2023, Tecpetrol’s financial advisor again contacted Alpha’s financial advisor to communicate Tecpetrol’s willingness to waive its previous requests for due diligence access and exclusivity and provide Alpha with an opportunity to engage directly in discussions with respect to the value of the Company with a view to increasing the Offer Price following discussions.
On June 1 2023, Tecpetrol’s financial advisor contacted Alpha’s financial advisor to propose specific steps for a confidential exchange of information regarding the value at which each party would support a potential transaction. Following that update, notwithstanding that Tecpetrol had waived its due diligence request, which eliminated the need for a non-disclosure agreement, Alpha insisted that Tecpetrol execute a comprehensive non-disclosure agreement in the form prepared by Alpha that would preclude Tecpetrol from making an offer directly to shareholders and inappropriately limit Tecpetrol’s strategic options; depriving shareholders of the opportunity to choose to accept or reject the Offer.
Tecpetrol is not prepared to accept these inappropriate preconditions. Accordingly, in light of Alpha’s repeated refusal to engage constructively in discussions with Tecpetrol to increase the Offer Price, Tecpetrol intends to proceed directly with the Offer to Alpha shareholders.
Source: Company Press Release