IFM lifts stake in Atlas Arteria to 40% after upping offer price

IFM Investors has raised its stake in Atlas Arteria from 34.5% to 38.3% in an on-market stock purchase, just a day after it raised its offer price for the toll road operator to $5.10 per security.

This takes IFM's total share in Atlas Arteria to 39.6%, which includes a further 1.3% held on behalf of its clients.

IFM's latest offer for Atlas Arteria values the toll road operator at around $7.4 billion, up from the initial offer made last April, which valued it at $7 billion.

Atlas Arteria, however, continues to tell shareholders to reject the offer noting the "bidder can pay more".

It said the offer continues to materially undervalue the firm and is 12% below the $5.79 midpoint of the independent expert's valuation range of $5.39 - $6.20.

Atlas Arteria also noted that IFM has a track record of paying more than its initial offer price and it might benefit the shareholder from not accepting its current offer.

"IFM has paid more than its initial offer price in a number of previous public market situations with increases on average of circa 38% relative to the initial offer price," Atlas Arteria said.

It gave the examples of Aleatica where IFM raised its offer prices from 27 to 37 Mexican pesos, Sydney Airport where it raised the bid from $8.25 to $8.75 per security and Vienna airport where it's increased the price by 70% from its initial offer price.

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.

Atlas Arteria today confirmed it is progressing the sale of part or all of its stake in Chicago Skyway and is targeting the signing of agreements in the fourth quarter of 2026.

It said the proceeds from any sales would be additional to its distribution guidance of 40 cents per share for the year.

IFM has also contested that any sale of the asset might lead to a tax inefficient outcome for Atlas Arteria and securityholders.

To that end, Atlas Arteria noted it expects tax costs on a sale of Chicago Skyway to be immaterial.