Atlas remaps Pilbara holding
THE BOURSE WHISPERER: Western Australian iron ore producer Atlas Iron has tightened its grip on the Pilbara region.
Atlas has reached an agreement with FerrAus Limited to further consolidate the Pilbara region, initially through a combination of the South East Pilbara iron ore assets of Atlas and FerrAus.
According to the joint ASX announcement released by the two companies this will create a substantial South East Pilbara focussed iron ore development and exploration company with a substantial land holding and resource inventory.
Immediately after the Subscription and Iron Ore Assets Acquisition are approved by FerrAus shareholders and completed, Atlas has agreed to make an off-market takeover offer for all FerrAus shares on issue on the basis of one
Atlas share for every four FerrAus shares, which has an implied offer price of $0.858 per share.
This also represents a significant premium of 34% to FerrAus’ closing price on 24 June 2011 and 38% based on Atlas’ 10 day VWAP on 24 June.
“This move represents an exciting step in the consolidation of the Pilbara,” FerrAus Limited chief executive officer Cliff Lawrenson said.
“From FerrAus’ perspective we see tremendous strategic rationale in the combination of both companies’ South East Pilbara assets in one vehicle.
“Not only does it significantly enhance FerrAus’ 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.
“Ultimately however, we believe there are significant additional benefits for all stakeholders flowing from a combination of 100% of both FerrAus and Atlas through this recommended takeover to achieve consolidation of the wider Pilbara region.
“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.”
Atlas and FerrAus have executed a Subscription Agreement for Atlas to subscribe approximately $24.3 million for just over 37.4 million FerrAus shares.
The deal also entails a binding Asset Purchase Agreement, in which Atlas has agreed to sell, and FerrAus has agreed to buy, South East Pilbara iron ore assets owned by Atlas that have strong synergies with FerrAus’ existing 331 million tonne Direct Shipping Ore iron ore resources, in consideration for some 121.8 million FerrAus shares.
The Subscription and Iron Ore Assets Acquisition will result in Atlas becoming FerrAus’ largest shareholder with a 38.3% holding upon completion on a fully diluted basis, and will be subject to FerrAus shareholder approval.
The shares issued to Atlas in consideration for the Iron Ore Assets Acquisition will be escrowed for 12 months.
“This is an amazing opportunity for both groups of shareholders to share in the benefits of consolidating these strategically important iron ore assets,” Atlas Iron managing director David Flanagan said.
“While the most attractive outcome is the combination of the two companies, 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.”
The transactions are subject to the approval of FerrAus shareholders and the Iron Assets Acquisition is also subject to obtaining third party consents.
FerrAus’ directors have unanimously recommend FerrAus shareholders vote in favour of the Subscription and the Iron Ore Assets Acquisition, subject to the opinion of an independent expert.