26/06/2018 - 13:54

FMG claims Hancock has misled Atlas investors

26/06/2018 - 13:54

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The battle for Atlas Iron has taken another twist after Fortescue Metals Group submitted an application to the Takeovers Panel questioning the veracity of the $390 million takeover offer by Gina Rinehart’s Hancock Prospecting.

FMG claims Hancock has misled Atlas investors
Andrew Forrest's Fortescue has submitted an application to the Takeovers Panel. Photo: Attila Csaszar

The battle for Atlas Iron has taken another twist after Fortescue Metals Group submitted an application to the Takeovers Panel questioning the veracity of the $390 million takeover offer by Gina Rinehart’s Hancock Prospecting.

Fortescue subsidiary NCZ Investments, which holds the Group's stake in Atlas, claims the bidder’s statement lodged by Hancock subsidiary Redstone has misleading statements and contains material omissions regarding its intentions for Atlas’s operations.

Its claims were summarised in a statement issued today by the Takeovers Panel.

NCZ Investments submits that Redstone's bidder's statement has:

  • misleading statements and material omissions regarding Redstone's intentions in relation to Atlas's business, assets and employees and Redstone's ability to achieve those intentions;
  • material omissions regarding the implications of Redstone's takeover bid for Atlas's Term Loan B Facility and Hancock Prospecting's intentions in respect of financing the repayment of that facility; and
  • misleading statements about the merits, terms and operation of Redstone's takeover bid.

NCZ submits that the: “Combined operation of the identified misleading statements and omissions and the structure of Redstone’s bid has a coercive effect on Atlas shareholders to accept the bid (or sell on-market potentially to Redstone).”

Fortescue is seeking interim orders restraining Redstone from dispatching its bidder’s statement and releasing any other information regarding the bid while the panel considers the application.

The group also wants Hancock Prospecting and Redstone to be prevented from acquiring, directly or indirectly, any further shares until further and corrective disclosure is released.

Final orders are also being sought including that Redstone provide corrective disclosure by way of a replacement bidder’s statement and cancelling and unwinding any acquisitions in Atlas shares by Hancock during the period in which NCZ claims the market was misinformed.

FMG's attack on Hancock comes after it opposed an earlier bid for Atlas by Chris Ellison's Mineral Resources.

Hancock issued a statement today noting the Fortescue application and saying it will be talking to the Panel to explain its position.

"We are confident that our proposal is a good offer and we look forward to getting our offer to all Atlas shareholders," the company said.

Late this afternoon, Hancock lodged a supplementary bidder’s statement with the ASX, which touched on some of the matters raised by Fortescue.

The supplementary bidder’s statement remained open-ended on Hancock’s intentions, beyond its plans for a strategic review of Atlas Iron’s operations.

It canvassed multiple options, including developing Atlas deposits using existing infrastructure, for instance the rail line and port facilities developed by Hancock subsidiary Roy Hill Holdings.

This compares with the high-cost trucking operations currently employed by Atlas.

The supplementary bidder’s statement also flagged the possibility of blending Atlas ore with with ore from Hancock's other Pilbara operations, but again with no specifics.

However, it also acknowledged the possibility that Hancock may choose to close Atlas’ existing operations.

In this regard, it noted the relatively small size and low grade of Atlas’ resources and the discounts currently applied by steel mills to purchases of low grade ore.

It also stated that “Redstone has only conducted limited due diligence in relation to Atlas”.

The supplementary bidder’s statement touched on options for developing new berths at South West Creek at Port Hedland but was non-committal on whether this might be pursued.

Until 14 June, it had been understood Atlas held the rights to develop new berths at South West Creek, however the state government advised Atlas had lost its priority rights.

Finally, the supplementary statement indicated that Hancock / Redstone could provide loans to Atlas to enable repayment of its existing debts, but was not specific on any commitments.

The Takeovers Panel made no comment on the merits of Fortescue's application.

Fortescue has a 19.9 per cent stake in Atlas, while Hancock has a similar interest. 

The Atlas board has recommended shareholders support the Hancock / Redstone offer in the absence of a superior bid, after earlier supporting a scrip takeover lobbed by Mineral Resources.

The battle for Atlas has intrigued the market because there are few, if any, obvious synergies between the junior miner's operations and assets, and those of Hancock and Fortescue.

One possible motive is that Fortescue wants to minimise the volume of low-grade ore comng onto the market, and congestion at Port Hedland.

The Hancock bid is pitched at 4.2 cents per share.

Shares in Atlas were flat at 4.3 cents each at 3pm AEDT.

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