Atlas Iron Limited
AGO’s acquisition by Mineral Resources Limited: Atlas Iron Limited’s (ASX: AGO) stock rocketed 42.11% on April 09, 2018 after the company entered into a binding scheme implementation deed with Mineral Resources Limited (ASX: MIN) in relation to a combination of the two companies.
As per the agreement, AGO shareholders will receive 1 new Mineral Resources’ share for every 571 Atlas shares held on the record date. The all scrip offer represents 59% premium to the closing price of AGO share on 04 April 2018. Moreover, AGO shareholders will have continued exposure to the Atlas business, as well as exposure to a diversified mining services and processing company. The merger will result in benefits from transportation services, greater access to capital for growth, portfolio diversification, and a number of scale benefits from a larger production base across a broader range of commodities. Additionally, there is limited conditionality as the Scheme is not subject to financing or due diligence. Meanwhile, AGO stock has fallen 42.42% in three months as on April 06, 2018 and is trading at a high P/E. We maintain an “Expensive” recommendation on the stock at the current price. On the other hand, Mineral Resources Ltd.’s stock plunged by 6.9% on April 09, 2018 with the release of the above announcement.
The above move has reinforced the rising need of merger and acquisition related activity and is considered to benefit AGO looking at its exposure to the ongoing volatility in the iron ore market. The group had earlier reported a statutory after tax net loss for the half year ending December 2017 at the back of the tough trading conditions.
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