Atlas Iron Encourages Shareholders Towards Hancock Offer

In a heavily anticipated move, Atlas Iron (ASX:AGO) has officially recommended its shareholders accept the AU$390 million takeover offer from Hancock Prospecting subsidiary Redstone.

The statement, released by Atlas on Monday (July 16), explained that the company directors encourage the acceptance of the offer by shareholders in the absence of a superior proposal.

This also comes following a strategic review of the company by independent expert BDO Corporate Finance, which concluded that the offer was fair and reasonable to shareholders. Atlas had previously advised shareholders to wait on making a decision until the independent report was released.

According to the statement, the all-cash offer from Hancock, which came to AU$0.042 per Atlas share, represents a “compelling premium” to Atlas’ historical trading values and the value of Mineral Resources’ (ASX:MIN) previous AU$280-million bid for the company.

The value of Redstone’s offer represents a 121 percent premium to Atlas’ closing price of AU$0.019 per share on April 4, the day before MinRes made its merger proposal.

Atlas’ target statement also listed certainty of value as a reason to accept the offer, tying in with the additional listed reason that the latest financial and operational results show the company is currently operating at a loss. This comes from the knowledge that Atlas’ full cash costs were AU$62 per wet metric tonne (wmt) CFR, while the average realized price of product was AU$59 per wmt CFR.

The company also explained that it does not currently have the capital to fully develop its existing assets, raising concerns that Atlas will continue to generate losses.

The target statement acknowledged that there could be risks to not accepting the offer, such as potential changes to the Atlas Board and Atlas’ potential removal from the ASX. However, the directors said in the statement that they believe the advantages of the offer significantly outweigh any disadvantage.

Shareholders have until 5 p.m. GMT (Perth, Australia time) on August 3 to accept the offer.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.