Reasons to not gatecrash a mining rival's takeover
Reasons to not gatecrash a mining rival's takeover bid
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Chief Reporter
JUST what is the best adjective to apply to Randgold's audacious bid for Ashanti? Analysts range from the dismissive to damning. But the consensus seems to settle on "curious".
The obstacles facing Randgold seem at first blush to be overwhelming. First, Randgold is bidding for a company that is twice its size. Second, it is making an all share offer, which appeared at first to be at a healthy premium to AngloGold's offer, but after share price movements are taken into account and the break-fee is added, Randgold's premium has ended up being modest.
Third, being primarily an exploration company, Randgold does not appear to have the financial muscle to offer Ashanti much in the way of expansion opportunities.
Compare this to AngloGold's offer, which includes commitments to spend about $700m expanding the resource base of the company.
Fourth, Randgold's most successful investment so far and main asset is its 40% share in the Morila mine in Mali. Its joint venture partner and the actual operator of the mine is AngloGold. There must be quicker ways of infuriating your partners, but gate-crashing their takeover bids must rate pretty highly.
Fifthly, Randgold needs to satisfy a significant Ashanti shareholder in Lonmin, which has indicated it would like to exit its investment. Lonmin has a 28% share in Ashanti and may be more inclined to take AngloGold shares, which it could sell rather easily.
The Lonmin stake of AngloGold/Ashanti will be around 4%, while its stake in Randgold/Ashanti would be around 20%, a different proposition entirely.
"I can't see any rationale for this bid that is anything other than chauvinistic," said one analyst.
Other analysts have been even more scathing.
But there are more issues here than merely the immediate takeover bid and the key is the Ghanaian government's "golden share" in Ashanti.
Clearly, the government's 17% stake would be much less diluted were Randgold to win rather than AngloGold.
And it seems Randgold is much more flexible about retaining a "golden share".
But the critical issue is that with another bid in the water, the Ghanian government's bargaining position is markedly improved.
Aug 12 2003 07:36:49:000AM Tim Cohen Business Day 1st Edition
Tuesday
12 August 2003
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