IFM raises Atlas Arteria's bid, urges shareholders to accept

IFM Investors has raised its bid for Atlas Arteria to its maximum consideration of $5.10 per security, calling it the best and final offer in the absence of a competitive offer.

This values the toll road operator at around $7.4 billion, up from the initial offer made last April which valued it at $7 billion.

However, Atlas Arteria continues to recommend that shareholders reject IFM's offer.

"The offer is too low and materially undervalues Atlas Arteria. IFM is not paying an appropriate premium for control," Atlas Arteria said.

The new offer falls short of independent expert Kroll's valuation, which placed the global toll road operator's worth at a minimum of around $7.8 billion, with a fair value range of $5.39 to $6.20 per security. On the upper end, Kroll values the firm at around $9 billion.

Kroll had said IFM's initial bid undercut Atlas Arteria's value by a $1 billion.

"As both the offer price of $4.75 and the maximum consideration of $5.1 fall below our assessed value range for an ALX security, the offer is not fair," Kroll said.

IFM, on the other hand, urged shareholders to accept the bid at a premium to undisturbed trading prices and warned the price may fall in value materially following the offer.

Additionally, it called Atlas Arteria's independent directors' claim that additional value can be created by the sale of Chicago Skyway as "disingenuous".

It said the new offer price implies a valuation of the toll road operator's interest in Chicago Skyway in line with the acquisition price of 2022.

"There is no certainty that asset sales can be achieved at an acceptable price, and any sales may lead to a tax inefficient outcome for Atlas Arteria and securityholders. The timing of any asset sales are also highly uncertain, in contrast to the offer which provides cash certain value today," IFM said.

IFM launched a hostile takeover bid for Atlas Arteria in late April @%#37#@# , 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). IFM already owns a 34.5% stake in Atlas Arteria through its wholly owned subsidiary Diamond Infraco 1.

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 had 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, which allowed Atlas Arteria to consummate a transfer of its entire stake to a third party. It intends to continue exploring a sale of its 66.67% stake to a third party.