| Wed 2 Feb 2005, 10:00 | | Market angles for a higher Harmony bid |
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Market angles for a higher Harmony bid
February 2, 2005
By Nicky Smith
Johannesburg - If Harmony were to improve its offer for larger rival Gold Fields, tomorrow`s results presentation would be the perfect time to do so, fund managers said yesterday.
At yesterday`s close on the JSE Securities Exchange, the difference between Harmony`s offer and Gold Fields` market capitalisation was more than R2.7 billion - or R6.86 a share.
This was seen in the market as a clear indication that either shareholders wanted a higher offer or did not believe the bid would succeed.
Harmony has offered 1.275 of its shares for each Gold Fields share in the all-paper deal.
Harmony shares closed at R49.60 yesterday - 34 percent lower than when the company launched its hostile bid - while Gold Fields shares closed at R70.10 - 24 percent lower than when the bid was launched. The gold sector rose 1.98 percent.
`The whole thing is looking increasingly unlikely,` said a fund manager who asked not to be named. He had heard rumours in the market of an improved offer, although Harmony had been very circumspect about the possibility of it making a higher offer.
Another fund manager, who also asked not to be identified, confirmed there was talk in the market that if Harmony was going to make a higher offer, it would most probably announce its intention to do so at its results presentation tomorrow.
He said without a higher offer, Harmony could not take its bid any further. The problem Harmony faced was that if it increased its offer, its share price would fall, making any improved offer less attractive than it might have been.
Yesterday, Harmony reiterated its right to improve its offer without committing to do so. It said it had not spoken to any institution `concerning any potential increase`.
Harmony, which launched its bid for Gold Fields on October 18, admitted for the first time yesterday that, if it failed to win another 18.2 percent of Gold Fields, it could lose the support of Gold Fields` largest shareholder, Norilsk Nickel. It has received only 11.8 percent so far.
Harmony said it had `clarified` its relationship with Norilsk in terms of the irrevocable agreement that Norilsk would tender its 20.03 percent of Gold Fields into Harmony`s offer on competition approval.
Last week, Harmony waived securing control as a condition for its bid. This meant the only outstanding condition was competition commission approval, which is due this month.
Harmony said Norilsk was `not obliged to accept the offer` until Harmony had secured, with the Norilsk stake, more than 50 percent of Gold Fields` shares.
Previously, Ferdi Dippenaar, Harmony`s marketing director, said the only condition that needed to be satisfied was competition commission approval.
Meanwhile, trade union Solidarity said yesterday that in its submission to the commission, it asked for a two-year moratorium on job cuts.
Dirk Hermann, the spokesperson for Solidarity, said this moratorium did not include the 1 500 jobs that Harmony said would be lost through cutting staff from shared services and duplicated jobs at head office.
Solidarity said that by its calculations, Harmony would cut more than 7 000 operational jobs. It has also said that in its worst-case scenario as many as 14 000 people might lose their jobs.
