As expected Atlas Iron’s board is set to be swallowed by the very much larger Mineral resources (MinRes) for an all paper $280 million bid which in the end is a pittance.
The Atlas board said yesterday it expects to recommend its investors accept an all-scrip offer from Mineral Resources, barring a higher bid.
The deal will be done via a scheme of arrangement.
MinRes said under the terms of the binding agreement, Atlas shareholders will receive one new MinRes share for every 571 Atlas shares. That all-scrip offer values Atlas at 3.02 cents -a-share and represents a 59% premium to Atlas’ 1.9 cent closing price last Wednesday and a 28% premium to its 30-day volume-weighted average price.
Atlas said the offer continued to expose shareholders to the Atlas business while combining assets with a diversified mining services and processing company.
“It is an attractive opportunity given the inherent risks associated with Atlas’ current primary single commodity exposure, and an ongoing turnaround program,” the board said.
Atlas’ shares were up 42% to 2.7 cents, MinRes stock however slumped 7% to $16.05. Investors didn’t like that news at all, did they?
MinRes managing director Chris Ellison said the acquisition of Atlas, including its portfolio of iron ore assets and its export capacity allocation at Utah Point, was “on strategy” for MinRes.
“The culture that has been developed within Atlas is an exceptionally good fit with that which has been fostered in MRL,” he said in yesterday’s statement.
“The majority of the Atlas senior leadership team have been running the business for many years and their skillset, experience and intimate knowledge of the Atlas business will be an extremely valuable asset within the consolidated Atlas-MRL business.
“The amalgamation of MRL’s existing Pilbara iron ore assets with those of Atlas will enable us to exploit greater synergies and economies of scale which will drive down costs to ensure the consolidated iron ore business is sustainable in the new environment of lower global prices for low grade iron ore.”
Mr Ellison said increasing iron ore production would be a key part of the combined company’s strategy to ensure MinRes’ 50Mtpa Pilbara Infrastructure initiatives were fully utilised. Atlas managing director Cliff Lawrenson said: the combination with MinRes would protect and enhance the Atlas business.
Adding Atlas Iron’s assets at Port hedland’s Utah Point shipping zone will be much cheaper than had MinRes had to build from scratch, and as will be accessing Atlas’s iron ore assets.
Atlas Iron has been diversifying into manganese and lithium processing for third parties to improve use of its infrastructure, including its up to 13 million tonnes of port capacity at Utah Point in Port Hedland. In the December half year, Atlas reported a statutory net loss after tax of $21 million. Sales were $308 million, down sharply from $498 million previously.
By contrast, Mineral Resources increased revenue by 22% to $962 million and net profit after tax by 16% to $163 million.
