An Update on Hancock Offer On September 26, 2018, Atlas Iron Limited (ASX:AGO) released a press release which covers the update regarding the Hancock offer. Hancock Prospecting Pty Ltd has made an off-market takeover bid in regard to the issued shares of Atlas Iron Limited with the help of the wholly-owned subsidiary named Redstone Corporation Pty Ltd. The report which was submitted by Atlas to Australian Securities Exchange on July 16, 2018, has been prepared by the independent expert. The expert’s report stated that the offer which has been made by Hancock is reasonable when considered the interests of the shareholders of Atlas.
Redstone has come up with a conditional increase. As per the release dated September 26, 2018, subject to a rise in the voting power of Redstone to 87% or higher (against earlier disclosed 77%), the offer price would be raised to 4.6 cents against per share of Atlas (up from 4.2 cents per share). However, this rise in the voting power should be made in the course of offer period. Upon the satisfaction of the mentioned condition, Redstone would also be shelling out additional 0.4 cents against the per share of Atlas. This would be given to the shareholders who would be accepting the offer of Hancock before any change is made in regard to offer price. Needless to say, offer price would not be raised if the condition doesn’t get satisfied.
A Glimpse of Atlas Iron’s FY 2018 Results
Atlas Iron Limited reported a fall in the revenues as well as EBITDA or earnings before interest, tax, depreciation and amortization in FY 2018 on the YoY basis. The company recorded revenues amounting to $547 million in FY 2018 while in the previous year the figure amounted to $871 million. On the other hand, the company’s EBITDA amounted to $16 million in FY 2018 reflecting the substantial fall from $116 million in the previous year. This huge decline YoY was witnessed on the back of lower revenues. The company’s revenues were negatively impacted on the back of a decline in the USD headline price, volumes as well as increased discounts on low-grade products which has offset the higher lump premiums as well as lump product’s increased proportion.
However, the company’s costs were quite elevated on the back of a rise in the sea freight charges, higher average haul distance as well as lesser dilution of the fixed costs. These increased costs were also the reason for the company’s lower EBITDA in FY 2018. The haul distance referred above refers the distance between mine and port.
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