Peak Rare Earths to be Acquired by Shenghe in $158m Deal: A Strategic Pivot Amid Geopolitical Hurdles

In a bold turn of events on the ASX stage, Peak Rare Earths (ASX: PEK) has entered into a binding agreement to be acquired in full by its cornerstone shareholder, Shenghe Resources Holding Co., via its subsidiary Ganzhou Chenguang Rare Earths New Material Co. The all-cash deal—valued at approximately A$158 million assuming full subscription of an accompanying entitlement offer—marks a significant pivot in Peak’s strategic direction and promises a hefty premium for shareholders, but not without its regulatory caveats.

The scheme of arrangement, inked on 15 May, offers shareholders a minimum of ~A$0.359 per share, which is a staggering 199% premium to PEK’s pre-announcement closing price of $0.12. The transaction is contingent on a $7.5 million entitlement offer and regulatory approvals in both Tanzania and China. If completed, Shenghe—already holding 19.86% of Peak through its Singaporean arm—will assume full control of the ASX-listed junior.

The transaction is designed as a response to increasing geopolitical and regulatory hurdles that scuppered a previously envisaged joint venture known as the NGUK Transaction. Under that now-defunct plan, Shenghe would have taken a 50% stake in Peak’s UK-based Ngualla Group via a $96 million investment, with the balance of project funding to be delivered through a debt facility. However, according to Peak, the JV structure faced mounting execution risk, prompting both parties to favour a simpler acquisition model.

“The proposed Scheme offer price of a minimum of ~A$0.359 represents an excellent outcome for shareholders,” said Peak CEO Bardin Davis. “It provides an opportunity to realise an attractive price for their shares and accelerate the realisation of the Ngualla Project’s value.”

Chairman Russell Scrimshaw echoed the sentiment, adding that the scheme represents “the best outcome currently available to shareholders on a risk-weighted basis.”

Notably, the Tanzanian government appears to back the move. The Minister for Minerals, Hon. Anthony Mavunde, publicly acknowledged the efforts of both parties in progressing the transaction and reiterated the strategic importance of developing the Ngualla rare earth project.

The scheme is not without its hooks. Shareholder approval is required—excluding Shenghe's own stake—as are tick-offs from China’s Ministry of Commerce and Tanzania’s Fair Competition Commission. A failure to satisfy these could trigger a $1.55 million break fee payable by either party. Interestingly, should Chinese approvals not be forthcoming, Peak reserves the right to compel Shenghe to purchase $1.55 million in new shares at a 20% discount to the scheme price—a tidy insurance clause.

Funding the company through the transition is a $7.5 million entitlement offer at $0.10 per share, non-renounceable and non-underwritten. Shenghe Singapore has pledged to take up its full pro-rata entitlement of $1.49 million, and the proceeds will support corporate expenses, Ngualla-related land compensation, and the costs of executing the scheme.

While the deal delivers a significant premium, shareholders must weigh it against the lingering uncertainties of development risk and capital funding. Should the scheme collapse—be it due to failed approvals or a shortfall in entitlement uptake—Peak may face dilution through alternative capital raises or, worse, a strategic limbo.

Pending shareholder and court approvals, the scheme is scheduled for implementation by early October, with the key vote slated for September.

In a sector rife with uncertainty, Peak’s tie-up with Shenghe may be a pragmatic play—exiting now for cash in hand, rather than continuing the slog through development and geopolitics.