| Mon 18 Oct 2004, 9:36 | | Harmony in hostile bid for rival Gold Fields |
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Harmony in hostile bid for rival Gold Fields
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SA`s largest gold producer, Harmony, is expected to launch a hostile bid for rival gold company Gold Fields today, in concert with Gold Fields` largest shareholder, Russia`s Norilsk.
Harmony is chaired by businessman Patrice Motsepe.
The company is expected to offer its own shares for Gold Fields stock, as it has been suffering from the strong rand, and it does not have enough cash to fund the deal, which could be worth R48bn, based on Gold Fields` market value.
If successful, the deal would enable Harmony to upgrade its asset profile, and would also enable Norilsk to torpedo offshore listing plans by Gold Fields, which is planning to reverse-list its non-Southern African Development Community (SADC) assets into Canada`s Iamgold.
Norilsk holds 20% of Gold Fields, and there has been recurrent speculation that it intends to raise its stake.
Harmony is believed to have been planning its move on Gold Fields for some time, but was prompted to act by rumours last week that a bid for Gold Fields was being formulated. Gold Fields share price rose sharply on Friday, surging 3,44% to R94,02 and forcing Harmony`s hand.
`If they`d waited much longer, the rising share price would have made the deal more expensive,` an industry source said.
Harmony is understood to have made its first offer to Gold Fields directors at the weekend, with a deadline of midnight last night. Gold Fields has repeatedly said it believes it is following the best strategy for its shareholders, and is expected to turn down the offer. If this happens Harmony will launch a hostile bid, expected to be announced today.
It is unclear what Norilsk is seeking from the deal, other than to prevent Gold Fields from reverse listing its non-SADC assets into Iamgold, which is due to be rebranded Gold Fields International after the transaction.
However, one likely scenario if the hostile take-over were to succeed would be Norilsk acquiring Gold Fields` international assets, with Harmony getting hold of the local and SADC mines. Another scenario would be Norilsk taking control of Harmony.
Gold Fields shareholders will be expected to want a healthy premium for any take-over deal. The transaction would be complicated by the need to obtain permission from SA`s competition authorities, and from the Reserve Bank if Norilsk is involved.
`There is likely to be a lot of concern about a Harmony bid,` said an analyst. `Gold Fields has a strategy its shareholders like, and they won`t want to give over control of their company, which has a respected management.`
Mark Smith and David Talbot of Dundee Securities of Canada said at the weekend January`s reverse listing of Gold Fields `should be difficult to stop, given its apparent universal support`.
However, if the deal were to go through, it would consolidate Motsepe not only as one of SA`s pre-eminent black entrepreneurs, but also as a major dealmaker.
Neither Harmony nor Gold Fields would comment on the proposed take-over yesterday.
Harmony`s share price closed 1,08% lower at R83,50 on Friday.
