Atlas launches FerrAus tie-up plan

Atlas Iron has joined the bidding for takeover target FerrAus, proposing a two-phase deal that will see the two miners' south east Pilbara iron ore assets consolidated before Atlas takes all of FerrAus' shares in an off-market bid.

As part of the asset acquisition, Atlas will subscribe for about $24.3 million worth of FerrAus shares, taking its shareholding in the company to 38.3 per cent.

The proposed takeover involves Atlas offering one of its shares for every four FerrAus shares, which represents an offer of 85.8 cents for each FerrAus share, 34 per cent higher than their last trading price before the deal was announced.

The combined companies would have a market capitalisation of $3 billion

FerrAus directors said they considered Atlas' offer superior to the $230 million hostile takeover proposed by Hong Kong investment house Wah Nam, which in November offered six Wah Nam shares for every FerrAus share.

FerrAus chief executive Cliff Lawrenson said the consolidation of Atlas and FerrAus' south-east Pilbara assets would create a larger, well funded company.

"Ultimately, however, we believe there are significant additional benefits for all stakeholders flowing from a combination of 100 per cent of both FerrAus and Atlas through this recommended takeover to achieve consolidation of the wider Pilbara region," he said in a statement.

Atlas Iron managing director David Flanagan said the strategic merit of combining the Pilbara assets was 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," Mr Flanagan said.

At close of trade today Atlas's stock had slipped 14 cents, to $3.29, FerrAus was up 15 cents to 79 cents and Wah Nam International was steady at 9.7 cents.