IFM builds Atlas Arteria stake to majority

IFM Investors has been slowly creeping control over Atlas Arteria through on-market stock purchases, finally crossing the 50% ownership mark.

Last week, IFM had raised its stake in Atlas Arteria from 34.5% to 38.3%, just a day after it raised its offer price for the toll road operator to $5.10 per security.

This week, IFM increased its stake from 38.3% to 40.7%, before lifting it to 45.6%. It has now acquired further shares today, taking its direct stake in the toll-road operator to 50.1%.

This takes IFM's total share in Atlas Arteria to 52.3%, which includes a further 1.3% held on behalf of its clients.

In the meantime, Atlas Arteria flagged that along with progressing with the divestment of Chicago Skyway, it has also entered an exclusive discussion to sell its German asset Warnow Tunnel to Eiffage S.A., a French concession and construction group.

Atlas Arteria intends to explore the potential for an all-cash acquisition of Warnow Tunnel and have entered into an exclusivity agreement which provides Eiffage with the opportunity to work exclusively with it for four weeks to conduct due diligence and negotiate transaction terms.

Atlas Arteria said net proceeds are anticipated to be approximately 11-13 cents per security, which it will distribute among shareholders.

The toll-road operator has also increased its distribution guidance for the year to 60 cents per share from the initial projected distributions of 40 cents per share.

"These distributions are expected to be funded by a combination of distributions from Atlas Arteria's portfolio cash flows, proceeds from potential asset sales and, where appropriate, utilising corporate borrowing proceeds," it said.

IFM reiterated its disappointment with and objection to the Atlas Arteria independent directors undertaking asset sales which are not value maximising in response to its takeover bid. It also objected to the additional distributions from the asset sale.

"Atlas Arteria is already unable to fund the 40 cent per security distributions out of available cash flows and has historically had to fund those distributions with corporate cash and/or capital releases from re-gearing proceeds at the asset level," IFM said.

"Any additional borrowings (including at the corporate level) to fund distributions will increase Atlas Arteria's financial risk and put further pressure on future distributions."

The takeover offer has been automatically extended to July 7 following the increase in IFM's voting power to greater than 50%.

IFM launched a hostile takeover bid for Atlas Arteria in late April, stating the action was spurred by continued underperformance from Atlas Arteria, and a significant change in strategy to pursue more mergers and acquisitions (M&A).

The toll road operator called the bid "too low, opportunistic and highly conditional" and asked shareholders to simply ignore all correspondence from IFM.

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

OTPP did not accept the notice, which expired on May 22. This allowed Atlas Arteria to consummate a transfer of its entire stake to a third party. It said it intends to continue exploring a sale of its 66.67% stake to a third party.

IFM also added that if OTPP has the option of exercising its put option and if it did, Atlas Arteria will have entered into the US$1.2 billion bridge facility. Under that facility, any proceeds from asset sales must first go toward repaying the facility, before they can be distributed to shareholders.