The European Lithium Ltd (ASX: EUR) share price has rocketed 50% after the ASX lithium share accepted a takeover offer from Critical Metals (NASDAQ: CRML).
European Lithium describes itself as a mining exploration and development company which wholly owns the Wolfsberg lithium project located in Carinthia, which is 270km south of Vienna, Austria.
Takeover offer accepted
The ASX lithium share announced that the two businesses are going to merge, with CRML paying for the takeover in new shares.
The exchange ratio will be 0.035 CRML shares for each European Lithium share.
If the proposal is implemented, each European Lithium shareholder will receive CRML shares valued at $0.58 per European Lithium share held.
It was also noted that the proposal also contemplates that all listed European Lithium options will be acquired through a scheme of arrangement. Optionholders will receive CRML shares, reflecting the ‘in the money’ value of their options.
What are the benefits of the deal?
For European Lithium shareholders, the obvious positive is the substantial premium that CRML is paying.
According to the ASX lithium share, the A$0.58 price is a 137% premium to the last closing European Lithium share price.
Plus, existing shareholders will still own close to half of the combined business, allowing them to participate in the growth of the business..
This will also be a simpler investment thesis – European Lithium’s largest asset is a 34% holding in CRML. This will remove the look-through valuation of CRML and its underlying assets, creating a more easily-understood investment proposition.
I’ll also note that the combined business may have advantages because of increased scale benefits.
What happens next?
It was noted that the accepted proposal is non-binding, other than negotiating exclusively with one another to complete due diligence and execute a binding agreement by 7 May 2026.
European Lithium has established an independent board committee (IBC) to consider the merits of the deal.
With how the business has rocketed higher, investors are clearly optimistic this will go ahead. I’d be happy to sell if I were a shareholder, though there is still a little more upside between the current price and the offer price.
Even so, I’d be happy enough to move on and invest in ASX growth shares.
