Atlas NYSE:ATCO Stock Report

The Atlas Corp. Special Situation

The majority shareholder group has made a non-binding offer to acquire the remaining outstanding shares of Atlas Corp. for $14.45/share. On 9/15, an activist investor published a letter that makes a compelling case that this offer severely undervalues the company. The current opportunity is best for those who like the special situation trade, yet would otherwise be interested in owning Atlas Corp. shares as a long-term investment. I received a number of reader comments/questions on the Atlas Corp. (ATCO) special situation, with most of them relating it to the MLP buyouts (Sprague Resources LP (SRLP), Blueknight Energy Partners (BKEP), Sisecam Resources LP (SIRE)) that I have commented on or written about. You can find my writeup on Sisecam Resources LP here. My two letters to Blueknight Energy LP's conflicts committee can be found here and here, and my Sprague Resources LP comment can be found here. Atlas Corp: Atlas Corp. (NYSE: ATCO) is a leading global asset management company, differentiated by its position as a best-in-class owner and operator with a focus on deploying capital to create sustainable shareholder value. Atlas brings together an experienced asset management team with deep operational and capital allocation experience. We target long-term, risk adjusted returns across high quality infrastructure assets in the maritime sector, energy sector and other infrastructure verticals. Our two main portfolio companies, Seaspan Corporation and APR Energy Limited are unique, industry-leading operating platforms in the global maritime and energy spaces, respectively. Source: Atlas Corp Situation: A majority shareholder group has made a non-binding offer to acquire the remaining outstanding shares of Atlas Corp for $14.45/share. The full statement can be found here. Yesterday, Atlas Corp shareholder Charles Frischer made a compelling case that the initial offer severely undervalues the company via a letter to the special committee evaluating the transaction which was made public yesterday. Given the above, it seems probable that at a minimum we will see some type of bump to the initial proposal. My take Playing this for a moderate bump looks like a reasonable trade - particularly when the share price is under the initial proposal level of $14.45. There are two big advantages over the recent MLP buyout proposals: Any deal will require the majority of minority shareholders to vote in its favor - this is a substantial shareholder protection. The timeline is expedited. The proposal states that that the consortium has a, "goal of entering into a binding definitive agreement within two to three weeks" of the conflict committee's engagement. This rapid timeline creates the potential for a very high IRR (Internal Rate of Return). However, I see increased risk of a "no deal" situation relative to the recent MLP take-privates. With the Atlas Corp proposal, the buyer group is 100% financially minded, highly sophisticated and acting opportunistically, whereas the MLP take-privates were/are strategic acquirers eliminating a nuisance security. I have zero doubt that this buyer group will cancel the proposal if they are unable to secure a bargain valuation.