| Fri 4 Mar 2005, 11:08 | | Harmony board to decide within two weeks on Gold F |
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Harmony board to decide within two weeks on Gold Fields buyout
March 4, 2005
By Nicky Smith
Johannesburg - Harmony Gold`s board would decide within the next two weeks whether to pursue its hostile bid for Gold Fields, Harmony`s chief executive, Bernard Swanepoel, said yesterday.
`We need to get together our board and have a good debate on whether this [bid] makes sense,` he said.
The Harmony bid for Gold Fields was dealt a potential deathblow last week when the competition tribunal set hearings for the first week in May.
Swanepoel said Harmony`s offer period expired on March 18 and it would now need an extension from the Securities Regulation Panel (SRP).
The tribunal must give its ruling by May 20. The same day, the irrevocable undertaking given by Norilsk Nickel, Gold Fields` largest shareholder with 20.03 percent, to support Harmony`s bid expires. Swanepoel said there was no guarantee that Norilsk would extend its irrevocable undertaking.
Norilsk, along with other Gold Fields shareholders, has seen the value of its shareholding in Gold Fields eroded by the hostile bid.
Late last year, Gold Fields estimated the two companies had lost as much as R1 billion off their collective market capitalisations every week for 17 weeks since the bid was launched on October 18.
Harmony`s bid has relied heavily on being able to say it has the support of Norilsk. Swanepoel said he had telephoned Leonid Rozhetskin, the Norilsk executive who has been steering the deal on behalf of Norilsk, to schedule a meeting, but no date had been set yet as Norilsk was on a road show.
First, he said, Harmony would need to decide `whether it makes sense to pursue this never-ending story`, and in a parallel process file applications to the SRP, which Gold Fields was sure to contest.
Citigroup analyst Christian Siebert wrote in a recent research report:
`With no increase in the offer in sight, the chances of the bid succeeding have virtually vanished; come May 20, Norilsk is likely to walk away.`
`It is time for Harmony to get back to the reality of managing their operations and to rethink their business model.`
He said keeping loss making mines open in the hope of the rand weakening was `not a business model we subscribe to`.
Swanepoel responded: `One of the challenges has been the strength of the rand. It has truly been stronger than we all expected.
`Harmony isn`t unique in this regard; 20 percent of AngloGold Ashanti`s production is loss making, about 25 percent of Gold Fields` production is loss making.`
`This is a structural adjustment in the local industry. This is an indication more consolidation is necessary, which is what we`re attempting [with the bid].`
Referring to the seven-month lag between the bid`s launch and competition authority approval, Swanepoel asked: `How are we ever going to do deals if the regulatory environment is so cumbersome?`
Harmony`s share price closed 68c up at R49.26, while Gold Fields closed R2.14 higher at R71.50 in Johannesburg yesterday. The difference between Harmony`s offer and Gold Fields` share price was R8.70 a share. The gold sector was up 2.86 percent.
