MENU

Why Fortescue Metals Group Limited (ASX:FMG) won’t give up buying Atlas Iron Limited (ASX:AGO)

There are new developments in the Atlas Iron Limited (ASX: AGO) takeover saga.

Last week, the $390 million offer from Gina Rinehart’s Hancock Prospecting seemed to put an end to the three-way battle for the control of the small iron ore miner.

Mineral Resources Limited (ASX: MIN) backed out and the board of Atlas quickly endorsed Hancock’s bid.

The third contender, Fortescue Metals Group Limited (ASX: FMG), remained silent – until Tuesday.

Two days ago, its wholly-owned subsidiary NCZ investments, which holds a 20% stake in Atlas, made a submission to the Takeovers Panel, stating Hancock’s bid included misleading statements and material omissions and asked it to forbid Hancock from acquiring further shares in Atlas until a corrective disclosure was released.

Hancock made a supplementary statement, clarifying some contentious points, including what would happen to Atlas’s much valued access to Port Hedland in case of a takeover.

The Western Australian Government has a policy of reserving port capacity for junior miners, but Hancock thinks Atlas would still be granted access, as long as it operates on a standalone basis.

Infrastructure assets are the main catalyst for all the interest around Atlas. Fortescue addressed the topic directly today, commenting on the news that the WA Minister for Transport didn’t recognise Atlas’s priority right to develop new berths in Port Hedland and that these would be set aside for junior miners. Fortescue said Atlas should clarify its position on this matter.

Atlas noted that the WA government hasn’t ruled out the possibility of a compromise on its “junior miner” policy in case an iron ore major takes control of the company.

The latest moves from Fortescue might just indicate the intention to impede a takeover from Hancock, but it’s also possible that Fortescue is planning to make its own bid. Amid all the uncertainty, today shares in Fortescue are down 1% to $4.48.

Foolish takeaway

Whether they end up buying Atlas and securing additional port capacity or not, I’m not a buyer of Fortescue at this stage.

Down 26% from its 52-week high in September, the stock seems attractively priced. However, I don’t think the company has a great outlook if Chinese demand for its low-grade iron ore remains weak.

I’d rather focus on companies poised to grow profits and dividends in 2018, like these three high flyers.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.