Fortescue has launched a $254 million off-market takeover bid to acquire Red Hawk Mining, bringing an undeveloped iron ore project in the Pilbara region of Western Australia into its fold.
The deal has been struck through a binding bid implementation deed (BID), under which Fortescue would acquire all of Red Hawk’s fully paid ordinary shares for cash consideration of $1.05 per share, increasing to $1.20 per share if Fortescue acquires a 75 per cent or more interest in Red Hawk within seven days.
This represents a 29 per cent premium to Red Hawk’s 30-day volume weighted average price (VWAP) to January 24, and the increased offer price represents a 48 per cent premium to Red Hawk’s 30-day VWAP to January 24.
The centrepiece of the acquisition is Red Hawk’s Blacksmith iron ore project, which is located 30km west of Fortescue’s Solomon operations in the Western Hub. Blacksmith’s total mineral resource estimate sits at 243 million tonnes at 59.3 per cent iron grade.
“The offer represents a significant and attractive premium to the market value of Red Hawk,” Fortescue said.
“The cash consideration under the offer delivers immediate value to Red Hawk shareholders and provides certainty, noting the significant risks to the development of greenfield iron ore projects.”
In its May 2024 pre-feasibility study for Blacksmith, Red Hawk identified ways to pursue alternative funding options beyond traditional financiers. These included a corporate transaction, recruiting a joint venture partner or undertaking a full or partial asset sale.
The company then conducted a comprehensive strategic process where it spoke with debt providers, offtake partners, iron ore producers and potential joint venture partners or acquirers to select the right development pathway for Blacksmith.
“In total through the process, Red Hawk engaged with 17 parties, including international groups, financiers, iron ore producers, steel mills and commodity traders,” Red Hawk said.
After careful consideration, Red Hawk found Fortescue’s offer to be “the most compelling” as it “provides superior value to Red Hawk pursuing development of the Blacksmith project independently”.
As a result, the Red Hawk board has unanimously recommended that its shareholders accept the offer at the offer price and, if relevant, the increased offer price, in the absence of a superior proposal.
“Whilst we firmly believe that the Blacksmith project has the potential to be a major iron ore project, there is significant cost, time and risk associated with developing a project of this scale, particularly in the context of an uncertain broader global economic outlook,” Red Hawk chair Cheryl Edwardes said.
“As such, the board believes that the offer provides shareholders with a compelling opportunity to de-risk their investment and realise certain value at an attractive premium to historical trading levels leading into the announcement of the offer.”
The BID contains exclusivity obligations such as “no shop”, “no talk” and “no due diligence” restrictions, and notification obligations and a matching right regime in the event of a competing proposal received by Red Hawk.
The offer is open and capable of acceptances from January 28 and will close on March 3 at 7pm AEDT, unless it is extended or withdrawn.
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