Gina Rinehart lobs $390 million takeover bid for Atlas Iron Limited (ASX:AGO)

Small-cap miner Atlas Iron Limited (ASX: AGO) was up 22% to 4.4 cents a share on Monday after receiving a new, and perhaps final, takeover bid.

Redstone Corporation, a wholly-owned subsidiary of Gina Rinehart’s Hancock Prospecting, offered to acquire the entirety of Atlas issued capital for a cash consideration of 4.2 cents per share. Hancock had recently acquired a 20% interest in the company for the same price.

The offer entails a 17% premium on Atlas’ last closing price, and a whopping 121% premium on the price of the stock at April 4, the last day of trade before the announcement of a first takeover proposal from Mineral Resources Limited (ASX: MIN).

Mineral Resources offered 1 of its shares for every 571 Atlas shares, with an implied offer price of just 3 cents a share. Hancock’s offer is not only 40% higher, but also safer: it’s in cash and has no minimum acceptance condition. Hancock doesn’t need external finance to fund the transaction – which prices Atlas at $390 million – as it can rely on cash reserves of over $3 billion.

The Atlas board will evaluate Hancock’s bid and provide shareholders with a recommendation. The company will also consider the right of Mineral Resources to match the new offer.

The Mineral Resources share price fell 0.7% to $16.88 on Monday, while Fortescue Metals Group Limited (ASX: FMG), a potential third contender that had also recently acquired a 20% interest in the company, fell 1.6% to $4.64. Neither of the two companies has yet updated the market with their response to Hancock’s move.

Foolish takeway

The fact that Atlas is now trading above the price offered by Hancock may indicate that investors expect a counterproposal from either Mineral Resources or Fortescue.

Although Atlas has attracted much attention of late, probably more for its infrastructure assets than for its iron ore business, I’m not sure these companies will take a chance to challenge Rinehart’s deep pockets, and even if they did, Atlas shareholders may still prefer Hancock’s all-cash low-conditionality offer.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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