Harmony(HMY)/Norilsk want Gold Fields(GFI), spurn Iamgold(IAG)
Harmony to Buy Gold Fields
CBS Marketwatch
LONDON (CBS.MW) -- South African mining group Harmony announced Monday its intention to make an $8.1 billion offer for rival Gold Fields to create the second largest gold mining company in the world.
Harmony (HMY: news, chart, profile) (UK:HRM: news, chart, profile) said it would "shortly post" a detailed offer to Gold Fields (GFI: news, chart, profile) shareholders on the terms and conditions of the proposed merger. It said the deal has the backing of Gold Fields' largest shareholder, Russian metals giant Norilsk Nickel (NILSY: news, chart, profile).
Harmony shares closed Friday down 37 cents to $12.56. Gold dealers in London said the deal was the direct result of rising gold prices.
The terms offer 1.275 new Harmony shares or new Harmony ADSs for each Gold Fields share. The proposed deal sets a 29 percent premium for Gold Fields shares over the past 30 days, Harmony said, and values the company at $8.1 billion.
"This transaction represents tremendous opportunities for stakeholders of both companies," Harmony Chief Executive Bernard Swanepoel said. "Harmony has an extensive history of acquiring assets with turnaround potential and significantly enhancing their profitability. We calculate that we need a 15 percent cost reduction on Gold Fields' South African assets to justify our premium from this source alone."
Shareholders must choose between Harmony and Iamgold
The proposed bid could scupper Gold Fields' already announced plans to merge with Canadian firm Iamgold (IAG: news, chart, profile). Gold Fields shareholders will be asked to vote on the Iamgold merger before the end of the year.
Harmony said the offer is contingent on the Iamgold deal not proceeding, which it said it believes "to be contrary to the best interests of Gold Fields shareholders."
It added: "The immediate premium in our offer represents tangible value that can be realized today, rather than betting on a dubious re-rating scenario which is the foundation of the Iamgold transaction."
Norilsk, which bought a 20 percent stake in Gold Fields in March, has undertaken to "irrevocably vote" its entire block of shares against the Iamgold deal, Harmony said. Norilsk is thought to be against the deal because of current plans to spin off Gold Fields and Iamgold's combined operations in a new company with a separate listing, which would dilute Norilsk's stake.
