| Mon 17 Jan 2005, 9:31 | | Costs of Harmony-Gold Fields battle spiral |
|
Costs of Harmony-Gold Fields battle spiral
--------------------------------------------------------------------------------
Companies lock horns in an expensive stand-off that has cost them a combined total of R440m since the bidding war began
Chief Reporter
THE expected costs of Harmony Gold`s hostile bid for its larger rival Gold Fields have more than doubled since the offer was first made, with the parties now saying they are likely to spend a combined total of more than R440m.
This comes amid concern from large shareholders of both companies, which have warned of the haemorrhaging of value.
Since the bid was launched on October 18, Harmony`s share price has lost 26%, to close at R55,25 on Friday, while Gold Fields has fallen more than 20% to R73, from heights of R92 before the bid.
The companies will release financial results in the next few weeks illustrating how the bid has already cost them substantially — in an environment where gold producers are struggling to make profits off a lower rand gold price.
The costs are likely to act as a spur to talks, expected later this month, on possible `alternative transactions`.
Harmony director Ferdi Dippenaar said yesterday that talks were due to take place, but that no time or date had been set.
In amendments to its filings to the US Securities and Exchange Commission on January 10, Harmony said `the cash expenses to be incurred in connection with the US offer and the South African offer … are estimated, in the aggregate, to be approximately $46m (R266m)`.
Less than three months ago Harmony put the expected expenses at approximately $18,15m.
The escalation suggests Harmony may have expected an easier ride in its takeover bid — something Dippenaar has denied.
But he declined to provide reasons for the ballooning costs, saying `we will provide full disclosure on the costs at our quarterlies`.
Harmony will release its quarterly results on February 3.
Dippenaar said the takeover costs would have an effect on the results.
He said the R266m in bid costs would be partially recovered through benefits of the 11,8% of Gold Fields that Harmony had bought in its early settlement offer.
In its US filings, Harmony said its bid expenses included fees and expenses of financial advisers, dealer-managers, its agents in the US, printing costs, and accounting and legal fees.
The list of Harmony`s advisers on the deal is lengthy.
It includes HSBC, Investec, Merrill Lynch and Morgan Stanley as financial advisers; MacKenzie Partners as `information agents` in the US; and the Bank of New York as agents for its offer in that country.
Gold Fields has not had to provide a cost estimate to any of the regulators, but spokesman Willie Jacobz said he believed it would cost the company roughly R180m to defend itself against the bid.
`It will have an impact on our financial results (as) this is a lot of money … every cent we have had to spend on this is money wasted,` he said yesterday.
Gold Fields is expected to release its full-year results on January 31.
Although Harmony initially expected the bid to be wrapped up in February, it now looks unlikely that matters will be concluded before the end of March.
