Harmony board okays sale of 20% stake in ARM
February 4, 2005
By Nicky Smith
Johannesburg - Harmony Gold said yesterday that it had received board approval to sell its 20 percent stake in African Rainbow Minerals (ARM) to an unnamed empowerment company for R1.1 billion.
The company will be headed by Patrice Motsepe, who is ARM`s largest shareholder through his family trust, African Rainbow Mineral Investments (Armi), which holds about 43 percent of ARM.
Motsepe will inject between 8 percent and 10 percent of Armi`s shareholding in ARM into the empowerment firm. Armi will take a 51 percent stake of the firm and it, in turn, will hold about 30 percent of ARM.
Asked about who would be joining him in the venture, Motsepe said: `You will be surprised at the quality of people we have been able to pull in.`
The deal helps ARM to clean up its shareholding structure after a storm of corporate activity last year created complicated cross-shareholding structures.
Motsepe, the chairman of ARM, said in the past that when trying to present the company to potential investors, they had expressed concern about its unwieldy structure.
Simplifying ARM`s structure was the natural evolution of commitments made to shareholders, Motsepe said, adding the company`s liquidity would also need to be sorted out.
Georges Lequime, an analyst at RBC Capital Markets, said the deal made sense for ARM, not only because it simplified the shareholding structure, but it also ended the pooled voting agreement that existed between Harmony and ARM.
Lequime said investors preferred simple structures.
`They want to know the largest shareholders` interests are aligned with their own,` he said, referring to the voting agreement between Harmony and ARM.
Motsepe said the company had a `huge discount slapped on it` by investors because of the shareholding structure.
Bernard Swanepoel, Harmony`s chief executive, said Nedbank had underwritten the deal, adding that more details would be available once it had been concluded.
Harmony made another announcement yesterday. It had signed a memorandum of understanding with Afrikander Lease (Aflease) potentially worth R200 million in Aflease shares at a share price of between R2.60 and R2.70.
Aflease has with this deal secured the rights to about £260 million (R2.9 billion) of uranium from Harmony`s slime dams.
The first part of the deal is for R50 million, the second part of the deal is dependent on proving the grades and feasibility studies.
ARM`s share price closed 50c lower at R28 yesterday on the JSE Securities Exchange, while the other mineral extractors and mines sector fell 0.13 percent.
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