| Tue 9 Nov 2004, 9:34 | | Gold Fields Limited - Reject Harmony - Protect Val |
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Gold Fields Limited - Reject Harmony - Protect Value
Gold Fields Limited
Registration number: 1968/004880/06
ISIN: ZAE000018123
JSE Code: GFI
(`Gold Fields` or the `Company`)
REJECT HARMONY - PROTECT VALUE
Do not tender your shares to Harmony
Vote against the Resolutions Proposed by the Harmony Board
Stop Harmony`s offer for Gold Fields
November 8, 2004
Dear Gold Fields Shareholder,
On October 18, 2004 Harmony Gold Mining Company Limited (`Harmony`) made an
unsolicited and hostile approach to merge with Gold Fields. By now, you should
have received our Offer Response document, which examines the merits of
Harmony`s offer. The analysis and conclusions therein support the Directors`
conviction that Harmony`s offer, as proposed, is categorically not in the
interests of Gold Fields shareholders and substantially undervalues your
Company. The purpose of this letter is to reiterate a number of the key
arguments and outline the pro-active action you can take to preserve shareholder
value.
The Harmony proposal consists of two parts: An `early settlement` offer to
acquire up to 34.9% of Gold Fields shares on the basis of 1.275 Harmony shares
(or ADSs) for each Gold Fields share (or ADS); and a `subsequent offer` for the
remaining Gold Fields shares and ADSs not tendered in the early settlement
offer, including the Gold Fields shares owned by Norilsk. The subsequent offer
is conditional upon, among other things, Gold Fields shareholders rejecting the
proposed transaction with IAMGold and Harmony successfully passing it`s special
resolution to increase its authorized share capital at its EGM on the 12th of
November.
Two-part transaction structure is highly coercive. It allows Harmony (with the
support of Norilsk) to be in a position to exercise control over Gold Fields
without successfully bidding for the whole Company, without normal regulatory
approvals and without paying a full control premium. The terms of the Norilsk
undertaking not to accept the early settlement offer confirm, we believe, that
they are acting together in this respect. Furthermore, because of the
relatively small number of acceptances that Harmony needs in order to exercise
its influence, the offer puts excessive power in the hands of a limited number
of Gold Fields shareholders with short-term interests to the detriment of the
wider Gold Fields shareholder community. This means that you, the loyal Gold
Fields shareholder, could be left invested in Gold Fields in circumstances where
the subsequent offer fails but Harmony, together with Norilsk, are free to
exercise significant influence.
The Harmony offer destroys shareholder value. It is dilutive to Gold Fields
shareholders based on metrics such as earnings per share, operating cash flow,
net present value per share and balance sheet strength. Harmony is visibly
financially stretched as evidenced by its five successive quarters of headline
losses and deteriorating balance sheet. In stark contrast to Harmony, Gold
Fields is well-capitalised, operating a sustainable business and generating
profits for its shareholders. Given today`s gold price environment, your Board
believes Harmony is overvalued compared to Gold Fields and that Harmony`s all-
share offer fails to reflect this.
Even if one accepts (and as emphasized above, your Board does not) that current
market prices accurately reflect the relative value of both companies, the
premium Harmony is offering Gold Fields shareholders is grossly inadequate. The
premium calculated using the closing prices of each company`s ADSs on the NYSE
one day prior to announcement was a mere 7%; this compares to an average of over
40% in similar precedent situations since 1994.
In addition to significantly undervaluing Gold Fields shares, Harmony proposes
that Gold Fields shareholders accept its shares and not cash. Cash is the usual
form of consideration offered in unsolicited and hostile situations. For Gold
Fields shareholders this means that the value of what you are being offered is
dependent on Harmony`s share price performance during the course of the Offer,
the underlying value of the Harmony assets and the future performance of Gold
Fields assets under Harmony ownership.
This hostile offer, does not afford Gold Fields the opportunity to adequately
determine the true worth of the Harmony assets on your behalf. For example, your
Board is concerned by the unexplained differences between Harmony`s claimed
reserve position of 62 million ounces as reported in the 2004 Annual Report and
the 41 million ounces of reserves stated in the Competent Persons Report
included in Harmony`s South African offer document (Harmony did not make the
report available to our US shareholders).
The Board of Directors of Gold Fields urges you to reject the Harmony offer on
the basis that it employs an inappropriate offer structure and fails to fully
value your Company. If Harmony believes that the value proposition is fair to
Gold Fields then it should be presented in a form that allows all shareholders,
without coercion and with all the necessary information that a full prospectus
and/or friendly mutual due diligence would provide, to evaluate the merits of
the offer.
To this end, the Board of Directors, on behalf of its shareholders, are pursuing
a number of legal avenues to force Harmony to retreat or make a single properly
structured offer for 100% of Gold Fields share capital with a minimum acceptance
condition (>50%).
The Board have commenced an action in relation to the unlawful implementation of
the Offer under the Companies Act, on account of its failure to be accompanied
by a registered prospectus. In addition, we have also launched an urgent
application to the Competition Tribunal in terms of which a temporary interdict
is sought in relation to implementation of the early settlement offer.
Furthermore, Gold Fields has made a number of representations to the SRP, which
support our view that this proposal is not made in accordance with the spirit of
their rules.
Pro-active actions YOU, the Gold Fields shareholder, can take to preserve value.
To those Gold Fields shareholders who also own Harmony stock, the Board
recommends that you vote down Harmony`s special resolution to increase its
authorised share capital on November 12. Without this increase, Harmony will be
unable to effect any part of the transaction with Gold Fields. This will force
Harmony to take heed of our criticisms of the Offer, as currently proposed, and
retreat or return with revised terms, should it so desire, to the benefit of all
shareholders.
The Board also recommends that you should take no action in relation to either
the early settlement offer or the subsequent offer. Your Directors do not
intend to accept the early settlement offer or the subsequent offer in respect
of their own beneficial holdings of Gold Fields shares.
You should not sign any documents which Harmony or its advisers send you. If you
have given a mandate to a CSDP, broker, nominee, custodian, trustee or other
financial intermediary, you should instruct them to take no action.
If you have accepted either the early settlement offer or the subsequent offer
you should withdraw your acceptance by signing and completing the enclosed RED
Form of Withdrawal of Acceptance (if you hold Gold Fields shares) or the
enclosed GREEN Notice of Withdrawal (if you hold Gold Fields ADSs). Completed
RED Forms of Withdrawal of Acceptance (in respect of Gold Fields shares) should
be returned to Harmony`s transfer secretaries in accordance with the
instructions set out on the Form of Withdrawal of Acceptance. Completed GREEN
Notices of Withdrawal (in respect of Gold Fields ADSs) should be returned to the
Bank of New York, as tender agent, in accordance with the instructions set out
on the Notice of Withdrawal.
Yours Sincerely,
Chris Thompson
Chairman
The directors of Gold Fields accept responsibility for the information contained
in this document. To the best of their knowledge and belief (having taken all
reasonable care to ensure that such is the case) the information contained in
this document is in accordance with the facts and does not omit anything likely
to affect the import of such information. Copies of this document are not being
made available, and must not be mailed, forwarded, transmitted or otherwise
distributed or sent in or into Australia, Canada, Japan, the Republic of Ireland
or any other jurisdiction in which it is illegal to make the offer and persons
receiving this document (including custodians, nominees and trustees) must not
distribute, forward, mail, transmit or send it in or into or from Australia,
Canada, Japan, the Republic of Ireland or any such other jurisdiction.
Date: 09/11/2004 08:05:03 AM
Produced by the JSE SENS Department
