On September 8, Western Australian iron ore companies Warwick Resources (Warwick) and Atlas Iron (Atlas) announced that Atlas has agreed to buy Warwick for AU$65 million ($56 million) in stock to increase the supply of the steelmaking material and boost its bargaining power with mills.
As per the companies' statements, the share scheme consideration will comprise one Atlas share for every three Warwick shares, or 55.67 cents based on Atlas' closing share price yesterday, which was 20 percent more than Warwick's closing price yesterday. Atlas is Warwick's largest shareholder with a 22.3 percent stake.
The combined company will have 154 million mt of direct shipping ore (DSO) resources, plus exploration targets of 165 million mt to 338 million mt at 56 percent to 60 percent Fe, and a Pilbara landholding of more than 15,000 square kilometers.
Warwick shareholders will participate in Atlas' fast growing production profile, project pipeline, mining and project execution expertise, substantial existing iron ore resource inventory and the combined company's production target of 26 million mt per annum by 2014, while Atlas shareholders will benefit from access to Warwick's significant landholding in a major iron ore province with potential to host large-scale, long-life projects, increasing Atlas' production profile.
The proposed merger has the full support of the boards of both companies and, in the absence of a superior proposal, Warwick's board recommends Warwick shareholders and option holders vote in favor of the merger.
Commenting on the transaction, Warwick chairman Will Burbury said, "Atlas has made a very attractive offer to Warwick shareholders which not only provides an immediate uplift in the value of Warwick shares but provides the opportunity to participate in the continued development of our projects, as well as exposure to existing production with a rapidly growing production profile and mining and marketing expertise."