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

Fortescue Metals Group Limited (ASX:FMG) is challenging Gina Rinehart for the control of strategic infrastructure assets in WA.

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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.

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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