Atlas Iron bids for FerrAus in move to scuttle Wah Nam's Pilbara plan
Michael Bennet From: The Australian June 27, 2011 9:41AM
ATLAS Iron has moved to scuttle Wah Nam's Pilbara consolidation plans, announcing a rival offer for takeover target FerrAus.
In a complex deal, Atlas and FerrAus today unveiled a plan to combine their South East Pilbara iron ore assets into FerrAus, followed by Atlas making an off market offer for FerrAus.
FerrAus, which has been fending off Hong Kong's Wah Nam, has backed the offer, which would see its shareholders receive one share in Atlas for every four FerrAus shares at an implied price of 85.8 cents a share -- a 34 per cent premium to FerrAus? last traded price.
Analysts at Foster Stockbroking said the deal would dilute Wah Nam's shareholding in FerrAus to 11 per cent down from 18 per cent. Wah Nam has also secured 55 per cent of FerrAus neighbour Brockman Resources and planned to merge the assets of the two.
"Given Wah Nam?s interest in FerrAus (combined with a takeover offer for Brockman), we don?t expect them to walk away from FerrAus and we would expect any sweeteners to come in the form of a cash component of an increased bid," said analysts at Foster.
In a precursor to a full bid, Atlas would sell its South East Pilbara iron ore assets to FerrAus for a 38.3 per cent stake in the target. This would be followed by Atlas's scrip takeover offer, which values 100 per cent of FerrAus's equity at $214m. The acquisitive Atlas has a market value of about $2.8bn after in December acquiring Giraliaa Resources $828m.
"We see tremendous strategic rationale in the combination of both companies? South East Pilbara assets in one vehicle," said FerrAus chief Cliff Lawrenson. "Not only does it significantly enhance FerrAus?s resource base and provide valuable economies of scale, but it also creates a larger, well funded company with a strong supportive shareholder to provide for the development of those assets.
?We strongly consider both transactions to be attractive propositions for FerrAus shareholders that provide real value and represent a superior alternative to either the current takeover offer from Wah Nam or proceeding on a stand-alone basis.?
Consolidation of the juniors in the Pilbara has been expected to gain synergies for port and rail and to compete with majors BHP Billiton, Rio Tinto and Fortescue Metals Group.
Atlas managing director David Flanagan described the deal as an "amazing opportunity". It would combine 489 million tonnes of DSO resources in south-east Pilbara, and additional exploration targets, and reduce capital costs as well as provide greater accessibility to funding.
"The strategic merit of combining the south-east Pilbara assets is undeniable. It substantially grows the resource inventory of FerrAus and injects considerable opportunity for rapid growth in resources through continued exploration, while providing the leverage required to pursue infrastructure development in the region,? said Mr Flanagan.
Atlas is being advised by Hartleys, Blake Dawson and Satori Investments, with FerrAus advised by Gryphon Partners and Hardy Bowen.
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