Atlas Arteria rejects 'exploitative' IFM takeover bid

Atlas Arteria has recommended shareholders reject IFM's hostile takeover bid, calling it "too low, opportunistic and highly conditional".

The toll road operator said each independent director will reject IFM's offer and told shareholders to simply ignore all correspondence from them.

The bid was launched by Diamond Infraco 1, a wholly owned subsidiary of the IFM Global Infrastructure Fund, which already holds a 34.48% stake in Atlas Arteria, with a further 1.21% stake held by or on behalf of clients of IFM Investors.

Atlas Arteria chair Debbie Goodin said: "The hostile, highly conditional takeover offer from IFM is opportunistic and materially undervalues Altas Arteria. The offer is designed to accelerate IFM's creep to effective control of Atlas Arteria without paying a fair premium to securityholders."

IFM has offered a price of $4.75 cash per stapled security, less any distributions paid by Atlas Arteria.

However, the toll road operator said it has already given a distribution guidance of 40 cents per share for 2026.

IFM said it would increase the offer price by 35 cents to $5.10 per security if its relevant interest in Atlas Arteria is 45% or more prior to close of the offer.

Atlas Arteria, however, said a $4.75 offer price is less than a 10% premium to the last closing price prior to when the offer was made. It is also below yesterday's closing price of $4.79.

"If the offer was increased to $5.10 per stapled security, the implied premium would be around 3% above the average security price over the last 12 months and less than 20% to the last closing price prior to when the offer was made," it said.

"This is well below the takeover premium typically observed in control transactions for high-quality listed infrastructure assets."

In its bidder's statement IFM said the offer was spurred by continued underperformance from Atlas Arteria, and a significant change in strategy to pursue more mergers and acquisitions (M&A).

It has made it known to the Atlas Arteria board and management that it has "strong concerns" about the recent change in strategic direction to pursue M&A more broadly.
It warned shareholders who do not accept IFM's offer could risk continued underperformance.

However, Atlas Arteria independent directors' assessment found the price to be materially below its fundamental value to adequately reflect the value of the high-quality global toll road portfolio and its embedded growth opportunities.

Atlas Arteria said IFM is trying to exploit the recent divergence between its current price and value due to recent macro volatility.

"The security price is currently impacted by the Middle East conflict, foreign exchange and interest rate movements and increasing illiquidity due to IFM's holding - all factors which are unrelated to the fundamental value of the assets in the portfolio," it said.

"IFM acquired securities at $5.10 per stapled security as at November last year and is now offering only $4.75 per stapled security to obtain control of the company."

Additionally, it said IFM is downplaying the significance of the conditions of its offer.

"In reality, the offer is subject to an extensive and highly restrictive set of conditions spanning more than 10 pages," it said.

Atlas Arteria said conditions such as "no distribution" and "conduct of business conditions" if observed will deprive shareholders from receiving distributions as well as would frustrate the day-to-day operations of the business.

In its bid, IFM  pointed to Atlas Arteria's acquisition of the Chicago Skyway in 2022 - after which Atlas Arteria said it would not be pursuing further M&A, other than growth opportunities directly related to, or in proximity of, the existing business.

"The bidder wished to avoid a repeat of what it regards as the shareholder value destruction associated with the Chicago Skyway acquisition in 2022," IFM said.

Atlas Arteria said prior to the takeover bid it was actively considering its holdings in Chicago Skyway and had issued a notice to Ontario Teachers' Pension Plan (OTPP), the other major shareholder in Chicago Skyway, to sell its stake.

However, IFM's condition on the takeover offer said if IFM buys Atlas Arteria, OTPP can force Atlas Arteria to buy their remaining 33% stake at a premium. This, IFM said, could risk an equity raising to fund the acquisition of OTPP's interest in Chicago Skyway if the put option is exercised.

The independent directors of Atlas Arteria have called out IFM for this "jarring inconsistency".

The board pointed out that while IFM is publicly using the "put option" to spook shareholders of the potential equity raise, IFM's own offer is strictly conditional on OTPP waiving those rights for free.

The board argues IFM is portraying the option as a "material risk" to drive down the company's value, yet IFM has made it a condition of the offer that OTPP waive its pre-existing contractual rights to avoid that very situation.

"The boards and management remain focused on continuing to deliver on the strategy to optimise company value and create value for all securityholders," Goodin said.