| Tue 12 Apr 2005, 8:59 | | Wavering Norilsk threatens success of Harmony’s bi |
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Wavering Norilsk threatens success of Harmony’s bid
John Fraser
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HARMONY CEO Bernard Swanepoel conceded for the first time last night that his bid for rival mining company Gold Fields could fail because of a U-turn by his chief ally, Norilsk Nickel of Russia.
This shows that despite his confidence in October when the hostile takeover offer was launched, the bid may have been doomed from the start.
Norilsk’s support for Harmony was achieved via an irrevocable agreement committing the Russian company’s 20% of Gold Fields to Swanepoel.
Norilsk’s support has been widely seen as being essential to Harmony’s bid, as the Russians hold the largest block of Gold Fields shares.
However, Swanepoel admitted last night that far from being staunch allies of Harmony, “Norilsk has consistently been on the side of Norilsk”.
He said that at the time the irrevocable agreement was signed, Norilsk was being offered a premium of almost 30% on its investment in the all-share bid, in which 1,275 Harmony shares are being offered for each Gold Fields share.
More recently, the ratio between the shares has altered, and Gold Fields shareholders would be able to get more by selling shares on the market than through accepting Swanepoel’s offer.
Swanepoel said another reason for Norilsk’s deal with Harmony was that the Russians had not been fully consulted about plans to list Gold Fields’ offshore assets in Canada — a plan which was rejected by the target company’s shareholders in December.
Swanepoel said that as long as Norilsk’s interests had been aligned with those of Harmony, the Russians had supported Harmony.
However, he said he was aware of efforts by Gold Fields to put together a more attractive offer to Norilsk.
“If an offer from Gold Fields were more to Norilsk’s advantage, I would expect Norilsk to behave rationally,” he said.
He said that the terms of the irrevocable agreement “were clear from day one”.
Norilsk could escape the agreement with Harmony if a substantially better offer were to be forthcoming, and the agreement would expire seven months after the offer was launched, which would be on May 20.
Swanepoel said that he had attempted from the beginning to obtain an eight-month expiry date for the agreement with Norilsk under a worst-case scenario, but this had not been possible.
Swanepoel recently met Norilsk to discuss the Gold Fields issue, and said afterwards that the issue of a possible extension would be raised at a later date.
“Why would they, in the absence of key approval from the Competition Tribunal or a Gold Fields counter-proposal, give me an extension?” said Swanepoel yesterday.
“An extension was not agreed to, nor excluded as a possibility.”
Gold Fields claims that bias had been shown towards Harmony by the competition authorities.
It said if the rules were applied as they should have been, the bid would have expired after 60 days.
“Individuals are being served in their personal capacity, and the ramifications are quite horrific,” said Swanepoel.
“If you take away the regulators, you can’t do deals again. Their purpose is to scare the regulators.”
Swanepoel accused Gold Fields of having applied every legal trick in the book to try to frustrate and delay the approval proceedings.
When asked whether he was optimistic that his bid for Gold Fields would succeed, Swanepoel said that Harmony had 11,5% of Gold Fields shares “and we may have a call option for the 20% (held by) Norilsk.
“This is like starting a game of golf with a favourable handicap, or starting a race half a lap ahead of anyone else.”
Gold Fields’ spokesman Willie Jacobsz said that Norilsk would not sell its shares to Harmony because the offer premium had been eroded and the Harmony offer was now 15% lower than the market price for Gold Fields shares.
