Impala Platinum Holdings’ decade-long quest to buy a smaller rival that owns key assets to extend the life of its own mines in South Africa came to a shocking halt on Tuesday.
CEO Nico Muller thought that he had finally reached an agreement to acquire 100% of Royal Bafokeng Platinum, after obtaining the endorsement of the company’s management and board of directors. Implats, as the miner is known, was preparing to make an offer this week after announcing it was in talks on October 27, according to people familiar with the matter.
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But a 4.1% gain Monday on RBPlat, which until then reflected Implats stock movements since the announcement, raised suspicions that a rival was hanging around, said the people, who asked not to be identified as details are private. .
The company’s fears came true Tuesday morning, when Northam said it was buying a 32.8% stake in RBPlat, which could block Implats’ at least sixth attempt to acquire the company. RBPlat’s largest shareholder, Royal Bafokeng Holdings, the investment arm of the Bafokeng nation led by King Kgosi Leruo Molotlegi and his advisers, switched sides at the last minute to back a bid for its Northam stake.
While Northam’s offer of R17 billion is a 90% premium over where RBPlat was operating when Implats announced the talks last month, it excludes minority investors.
“The tragedy of this result is that almost everyone is a loser,” said Shane Watkins, chief investment officer at All Weather Capital Ltd., which owns shares in all three companies. “RBPlat minorities are losers because now there is no offer for minorities. Even the seller, Royal Bafokeng Holdings, could lose over time because a large part of the consideration is in Northam shares, the price of which is falling rapidly. ”
Northam was down 1.4% in Johannesburg on Wednesday, after falling 15% yesterday. RBPlat gained 2.1%, erasing most of Tuesday’s loss.
Since it was thwarted in its 2010 attempt to acquire RBPlat by rival Anglo American Platinum, a key shareholder at the time, Implats has been patient in its search. The prize was worth waiting for: low-cost mechanized assets that offered synergies with its nearby but former deep-level mines in Rustenburg. Two weeks ago, Implats was finally closing in on a deal that would have seen it surpass both Anglo Platinum and Sibanye Stillwater to become the number one platinum miner.
Muller was preparing a cash and stock offering with a 35% to 37% premium over where RBPlat shares were traded before the talks were announced, the people said. That works out to around R130 per share, significantly below Northam’s last minute offer of R180.50 in cash and shares.
While initially supporting the Implats approach, King Bafokeng and the high council agreed on Monday to back Northam’s offer. That deal was completed in one day, two of the people said.
Royal Bafokeng Holdings wanted to maximize value “both in terms of price and cash consideration,” said CEO Albertinah Kekana. “This transaction advances and accelerates the economic ambitions of Royal Bafokeng Holding, but also supports direct community interventions,” he said.
The Bafokeng Nation, a community of people in the northwestern province of South Africa, owned around R29 billion of assets in 2020, including some of the richest platinum deposits in the world.
RBPlat was surprised. This turn of events is “unexpected” and “the reasons are best known to” Royal Bafokeng Holding, said spokeswoman Lindiwe Montshiwagae, who declined to speculate on why the company’s biggest investor changed course.
The deal furthers the growth ambitions of Northam CEO Paul Dunne, and the company says that RBPlat’s involvement provides a “strategic platform” for a possible combination of the two miners in the medium term.
However, Dominic O’Kane, an analyst at JPMorgan Chase & Co., said the mining synergies with RBPlat are “negligible” and that the Northam deal has less compelling strategic merits than an Implats-RBPlats merger. “Given the lack of opportunities to create tangible value for Northam shareholders, optically this appears to be expensive portfolio management,” he said.
Leon Van Schalkwyk, a Northam spokesman, did not respond to calls or an email seeking comment. Implats will no longer “continue the transaction,” the company said in a statement Tuesday.
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