FMG Raises Red Hawk Offer to $1.20 as Ownership Hits 78%

Context of the Takeover

Red Hawk Mining Limited (ASX: RHK) has released a supplementary target's statement in response to the off-market takeover offer from FMG Pilbara Pty Ltd, a wholly owned subsidiary of Fortescue Ltd (ASX: FMG). This update follows the original target's statement issued on January 28, 2025, and provides critical new details on the status and terms of the bid.

FMG’s bid, initiated on January 28, is an all-cash offer for all Red Hawk shares, initially conditional but now progressing with significant shareholder acceptance. The supplementary statement, dated February 5, 2025, confirms FMG’s Relevant Interest in Red Hawk shares has surged to approximately 78%, surpassing the 75% threshold that triggers an increased offer price.

Increased Offer Price and Shareholder Incentives

With FMG’s stake exceeding 75%, the offer price has been increased to $1.20 per share, a substantial premium relative to Red Hawk’s historical trading prices. The premium ranges from 46% over the last closing price before the offer announcement to as much as 54% over the three-month volume-weighted average price (VWAP). This enhanced price applies retroactively to all shareholders who have already accepted the offer and prospectively to those yet to decide.

The Red Hawk board, supported by an independent expert’s assessment deeming the offer fair and reasonable, continues to unanimously recommend shareholders accept the offer. Directors emphasize the certainty of immediate cash consideration and caution against the risks of remaining minority shareholders, especially given FMG’s dominant position and potential plans to delist Red Hawk from the ASX.

Risks for Minority Shareholders and Strategic Implications

The supplementary statement highlights several risks for shareholders who do not accept the offer. With FMG controlling over three-quarters of the company, liquidity for remaining shares on the ASX could diminish significantly, potentially depressing market value. FMG has also indicated its intention to seek delisting of Red Hawk, which would further reduce tradability and market visibility.

In addition, FMG has foreshadowed compulsory acquisition rights should its ownership reach 90%, meaning dissenting shareholders could be forced to sell their shares later, likely at a less favourable timing. The board warns that if the offer lapses without a superior proposal, Red Hawk shares may trade below the current offer price, and the company could face dilution risks from a potential equity raise given its modest cash reserves.

Director and Employee Shareholdings

The statement also discloses recent changes in director holdings, with Managing Director Steven Michael receiving additional shares through employment agreements and vesting of performance rights, increasing his stake to over 4.5 million shares. Other directors hold smaller stakes and have indicated their intention to accept the offer. Employees have also been issued shares following the vesting of long-term incentive options, aligning their interests with shareholders amid the takeover process.

Next Steps and Closing Timeline

The offer remains open until 7:00pm AEDT on March 3, 2025, unless FMG decides to extend or withdraw it. Shareholders who have already accepted do not need to take further action to benefit from the increased offer price. Those yet to accept are urged to carefully consider the recommendation and the risks of declining the offer, especially in light of FMG’s substantial control and the absence of competing bids.

Red Hawk has established a shareholder information line to assist investors with queries, underscoring the importance of informed decision-making during this critical phase.