Northam Platinum is back in the boxing ring with Impala Platinum (Implats) as it tables a formal offer to acquire all remaining shares that it doesn’t own already in Royal Bafokeng Platinum (RBPlat) at R172.70 a share.
RBPlat’s shares frolicked to a gain of 10.21% at R1670 at the JSE close. This as Northam’s share price closed 6.06% lower at R178 on market unease of the deal.
Northam said the offer price amounts to R172.70 and was equivalent to the R180.50 purchase price paid to Royal Bafokeng Holdings (RBH) in November 2021, adjusted for the dividends subsequently declared by RBPlat in March 2022 at R5.35 and August 2022 at R2.45.
The offer was priced at an approximate 15% premium to the value of Impala Platinum's (Implats) offer on November 8, it said.
Northam currently holds 34.52% of RBPlat, and together with call options and a right of first refusal secured with the RBH, might increase its shareholding in RBPlat to 37.8%.
Rival Implats has accumulated just more than 40% of RBPlat.
Northam’s CEO Paul Dunne said: “The offer is aligned with Northam’s growth strategy and presents a unique opportunity to acquire a controlling interest in a scarce, high-quality ore body with established and well-capitalised infrastructure.
“We are confident in the rationale for all stakeholders in Northam and RBPlat, as well as the value unlock and value creation opportunities underpinned by the inherent value and growth potential embedded within RBPlat’s attractive asset base.“
He said since acquiring its initial shareholding in RBPlat, Northam's balance sheet, liquidity position and credit outlook had strengthened significantly, enabling Northam to present an offer construct to RBPlat shareholders with a compelling cash consideration and an attractive premium, while limiting the number of Northam shares to be issued.
“As of the date of the announcement, Northam has committed R10 billion for the cash consideration and has reserved the right to increase this amount. Based on the R10 billion upfront cash commitment, if RBPlat shareholders collectively holding less than 19.9% of the RBPlat shares in issue accept the offer, the offer consideration will be fully cash settled,” it said.
RBPlat late yesterday confirmed the offer and said within 20 business days of the Northam Offer Circular being posted to RBPlat shareholders it was required to post its response circular.
An independent board of directors will now look at the merits of Implats and Northam’s offers and what was fair and reasonable to RBPlat shareholders.
The “Independent Board does not express any view or recommendation on the merits of the Offer at this stage,” it said.
The latest bidding war comes as Gold Fields on Tuesday terminated its bid for Yamana Gold after it chose another suitor.
Anchor Capital investment analyst Seleho Tsatsi said Northam’s offer could potentially make its balance sheet more vulnerable if platinum group metals (PGM ) prices declined meaningfully over the next year or so.
“If PGM prices hold, free cash flow from Northam’s own operations should allow it to cover a large amount of the potential R10bn cash consideration that its offer includes,” he said.
Deal Leaders International CEO Andrew Bahlmann said: “Cooling metal prices in the face of rising interest rates might be behind the recent spate of competitive bids for mining groups.
“This reflects increased competition to secure attractive, large deposits which could result in even more bidding wars, than the RBPlats and Yamana transactions currently in the news.
“I sense that the pace of deals will quicken in 2022 through to 2023. In the instance of Northam, before a comparison of the two offers can be made on financial terms alone, the actual offer by Northam still has to be unpacked as to whether or not it is all cash,” he said.
Bahlmann said competing bids were always to be applauded as it gave more visibility and transparency to a deal, as opposed to one being quietly agreed behind closed doors – in the cases of private companies.
“Even though Implats currently has the largest stake in RBPlats, were Northam’s bid to succeed, it would gain control over RBPlats, and according to its announcements, it would respect any production arrangements with neighbouring Implats,” he said.
Bahlmann said, “Similarly the aborted Gold Fields offer for Yamana, I would not expect Implats to permit itself to become drawn into a bidding war as, again like Gold Fields, a premium might cause disquiet among shareholders.
“I would anticipate that Implats would not tender its 41% stake in RBPlat into Northam’s offer given the strategic importance RBPlat has to its shaft extension plans – and will simply retain its stake and both parties will learn to co-operate,” he said.
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