ASX microcap stock Midway Ltd (ASX: MWY) is off to the races today.

Shares in the wood fibre processor and exporter closed yesterday at 76.5 cents. In early morning trade, they leapt to $1.275 apiece, up 66.7%. Since then, they have retraced a touch and are currently swapping hands for $1.25, up 63.4%.

For some context, the S&P/ASX Small Ordinaries Index (ASX: XSO) is flat at this same time.

As you likely guess from the title of this article, investors are piling into the ASX microcap stock today following the announcement of a takeover offer.

Here's what's happening.

ASX microcap stock soars on acquisition bid

The Midway share price is going ballistic after the company reported it has entered into a binding Scheme Implementation Deed (SID) with RCM BidCo to acquire all of Midway's shares via a scheme of arrangement.

BidCo is owned by funds managed and advised by River Capital.

Under the proposal, shareholders of the ASX microcap stock would receive $1.19 cash per Midway share. This sum includes the partially franked special dividend of 38 cents per share Midway expects to pay.

At $1.19 a share, this implies an equity value for Midway of around $104 million.

The Midway board said it unanimously recommends that shareholders vote in favour of the scheme in the absence of a superior proposal, subject to an independent expert review certifying that this is in shareholders' best interests.

Midway's largest shareholder, Chebmont, which holds or controls approximately 23.8% of the ASX microcap stock, has said it will vote all its shares in favour of the takeover proposal.

What did management say?

Commenting on the takeover bid sending the ASX microcap stock rocketing today, Midway chairman Gordon Davis said:

The Midway board has carefully considered River Capital's proposal and made an evaluation of Midway's strategic plan as an independent company and the various operational and execution risks inherent in achieving this strategic plan and is unanimous in its recommendation to shareholders.

The Midway board believes the Scheme is an attractive opportunity for Midway shareholders to receive cash consideration at a significant premium, or, alternatively, continue the journey as shareholders in RollCo under the control of River Capital.

The company noted that under the proposal, and if certain conditions are met, Midway shareholders can elect to receive scrip consideration in BidCo's holding company or a mix of cash and scrip instead of the cash consideration.

Shareholders in the ASX microcap stock were advised that they do not need to take any action at the present time.