Fortescue Ltd, through its subsidiary FMG Pilbara Pty Ltd, has entered into a binding Bid Implementation Deed (BID) to acquire Red Hawk Mining Ltd in an off-market takeover. The deal offers up to $1.20 per Red Hawk share and represents a significant premium for shareholders.
Under the proposed offer, FMG has initially priced Red Hawk shares at $1.05 each at a base offer price, reflecting a 28% premium to the last closing price of $0.82 on January 24, 2025, and a 29% premium to the 30-day volume-weighted average price (VWAP) of $0.81.
If FMG secures a 75% interest in Red Hawk shares within seven days of the offer opening, the price will rise to $1.20 per share – a 46% premium to the last closing price and a 48% premium to the 30-day VWAP.
The Red Hawk board has unanimously recommended the takeover and RWK shareholders who accept the offer will automatically receive the higher price if the increased offer condition is met.
There are minimum conditions to be met.
The Independent Expert has deemed the offer fair and reasonable, and the Red Hawk board, guided by an Independent Board Committee, has urged shareholders to accept the offer in the absence of a superior proposal.
“Having carefully considered the merits of the offer, the Red Hawk board has unanimously concluded that the base offer price and the increased offer price are at an attractive level, with both representing a strong premium to recent trading, and that the offer is in the best interests of Red Hawk shareholders,” Red Hawk’s chair Cheryl Edwardes AO said.
“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.
"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 board is very proud of the significant work completed by the Red Hawk team to date, including the publishing of the pre-feasibility study for a 5 million tonnes per annum standalone mining operation at the Blacksmith Project, and believes that the offer is well-deserved recognition of this hard work and the significant value it has created.”
Post PFS takeover
The proposed acquisition is part of Fortescue’s strategy to expand its portfolio through targeted acquisitions.
It comes after Red Hawk identified in its May 2024 Pre-Feasibility Study (PFS) for the project opportunities to explore alternative funding strategies beyond traditional financing. These included considering a corporate transaction, securing a joint venture partner or undertaking a full or partial asset sale.
Following the completion of the PFS, Red Hawk initiated a comprehensive strategic review, engaging extensively with debt providers, offtake partners, iron ore producers and potential joint venture partners or acquirers.
The objective was to assess pathways for advancing the Blacksmith Project as outlined in the PFS or to identify alternative options that could deliver equal or greater value for shareholders.
As part of this process, Red Hawk engaged with 17 entities, including international groups, financiers, iron ore producers, steel mills and commodity traders.
A subset of these parties participated in detailed discussions covering a range of opportunities, from traditional project financing to potential mergers and acquisitions, including a corporate transaction involving a full or partial sale of the Blacksmith Project.
To facilitate due diligence, a virtual data room was provided, granting access to more than 3,000 documents for evaluation.
From this engagement, FMG’s offer emerged as the most compelling, with the board determining that it provides superior value compared to Red Hawk independently developing the Blacksmith Project.
The board's assessment weighed the risks associated with a standalone mining company advancing a single asset against the certainty and immediate value offered under the terms of FMG’s proposal.