Red Hawk Faces Delisting Risk as Fortescue’s FMG Pilbara Pursues Takeover

Fortescue’s Strategic Move into Red Hawk

FMG Pilbara Pty Ltd, a wholly owned subsidiary of Fortescue Ltd (ASX: FMG), has formally launched an off-market takeover bid for all ordinary shares of Red Hawk Mining Limited (ASX: RHK). The offer price stands at $1.05 per share in cash, with a conditional increase to $1.20 per share if FMG Pilbara secures a relevant interest of 75% or more by 7:00pm AEDT on 4 February 2025.

This bid marks a significant strategic move by Fortescue to consolidate its iron ore assets in the Pilbara region, leveraging its existing infrastructure and operational expertise. The offer was announced on 28 January 2025 and is open for acceptance until 7:00pm AEDT on 3 March 2025, unless extended.

Premium Offer Backed by Red Hawk Board

The Red Hawk Board has unanimously recommended shareholders accept the offer, emphasizing the attractive premium it represents. The initial offer price of $1.05 per share reflects a 29% premium to the 30-day volume weighted average price (VWAP) and a 28% premium to the last closing price prior to the announcement. Should the increased offer price of $1.20 be triggered, the premium rises to 48% over the 30-day VWAP and 46% over the last closing price.

The Board’s recommendation is contingent on the absence of a superior proposal and the Independent Expert continuing to conclude that the offer is fair and reasonable, or not fair but reasonable, to Red Hawk shareholders. Directors who hold shares have also indicated their intention to accept the offer, reinforcing confidence in the bid.

Bidder’s Position and Funding

FMG Pilbara currently holds a relevant interest of 19.99% in Red Hawk shares, secured through call option deeds with substantial shareholders TIO (15%) and OCJ (4.99%). The bidder has committed to funding the offer through Fortescue’s existing cash reserves, which stood at approximately US$3.4 billion as of 31 December 2024. The offer is not subject to any financing condition, underscoring Fortescue’s financial capacity to complete the acquisition.

Offer Conditions and Shareholder Implications

The offer is subject only to the condition that no prescribed occurrences, as defined under the Corporations Act, occur during the offer period. Notably, there is no minimum acceptance condition, meaning shareholders who accept the offer will be paid even if others do not.

Shareholders are presented with a 100% cash offer, providing immediate and certain value for their holdings. This removes exposure to the risks associated with Red Hawk’s ongoing development of the Blacksmith Iron Ore Project, including operational and funding uncertainties. Additionally, acceptance mitigates minority shareholder risks that could arise if the bidder gains control but does not acquire full ownership.

Future Intentions and Market Impact

Should FMG Pilbara acquire a relevant interest of at least 75%, it intends to request the delisting of Red Hawk from the ASX, transitioning it to a wholly owned subsidiary. The bidder also plans a comprehensive review of Red Hawk’s assets and operations, potentially leading to strategic realignments and integration with Fortescue’s existing Pilbara operations.

For shareholders who do not accept the offer, there is a risk of reduced liquidity and potential share price decline, especially if the bid lapses without a superior proposal emerging. The offer thus represents a compelling exit opportunity at a premium valuation.