Friday, January 21

Implats and Northam fight for control of RBPlat


FIFI PETERS: We’re talking about my favorite story today, and that’s the bidding war that is raging between Northam Platinum and Impala Platinum for Royal Bafokeng’s assets. It got hotter today when Impala announced that it had increased its stake in RBPlat even further to just over 32%. This after Northam Platinum announced yesterday that it had increased its stake in the platinum mine located just 30 kilometers from Rustenburg in the North West to 34.95%, let’s call it 35%, with the option to increase it further to around 38%. . This is the most intense struggle for control in a company right now, specifically in the platinum sector.

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We have Peter Major, Mining Director at Mergence Corporate Solutions, here to tell us more. Peter, what are your initial thoughts on the action that has occurred so far?

PEDRO MAYOR: Wow, this is a very difficult fight because you have two very equal matches that want the same asset. They are roughly the same price of stocks and have the same kind of good stewardship that knows what to do with these assets. So yeah, what do we do with it? Neither one of us is going to let go without a fight. But I think the market is very hopeful that Impala will get it, because Impala will definitely pick up on synergy more easily, which will help you boost your share price, help you increase your earnings, and help you extend your life.

FIFI PETERS: I can tell you that the latest executive to punch the fire today is Paul Dunne, CEO of Northam. I see Royal Bafokeng issued a statement today to say that a special meeting will be held on January 13 with Mr. Paul Anthony Dunne, as well as with Ms. Aletta Helena Coetzee, both directors of Northam, to discuss their seats at board.

PEDRO MAYOR: Yes. Look, when you buy enough shares, they have to give you a seat on the board. It comes with the check. You’re not spending that much money to have someone else decide your future for you, so the question is who will get the 50%, and that’s what the game is all about. You want to get 50%, then you are in control.

The Public Investment Corporation, the PIC, probably has the bigger hand, but Sanlam and Kagiso have enough stocks too. So both parties are likely going to have dinner with them, and most investment institutions are reviewing shareholder funds, client funds, and they have to do their best. If you look at what is best for the country, and the PIC is supposed to have a somewhat different vision than the average fund manager.

We always hear various government officials say that their job is to create jobs, their job is to ensure a good future for the country and do whatever is in their interest. One thing’s for sure: If Impala doesn’t do this, it will be under a lot more pressure than if Northam doesn’t.

FIFI PETERS: I don’t know if you can read much about the position Ninety One Asset Management took today to increase its stake in Impala. I don’t know if that’s Ninety One stating their opinion on who will win this race. Nonetheless, I was looking at Northam and Impala stock prices and they were both weaker on the day – between 3% and 4% last time I checked. Should we interpret some of the weakness in stock prices today?

PEDRO MAYOR: Fifi, because they run shoulder to shoulder, it’s very difficult to say what made them both fall, because you’re right, they fell almost equally. But if you look at the PE, Northam looks a bit more fragile at an 8.5 PE compared to Impala at a 5 PE, and Northam pays R180 / share to get his shares, while Impala pays R150 / share. So it is obvious that Northam will pay much more if it wants to get more shares and it will be difficult to justify how an IRR is obtained. [internal rate of return] on an asset that you are paying R180 / share for, whose asset was trading at around R100 / 110 a month ago, while Impala has to justify how they are going to get a positive IRR by paying R150 / share.

This is why people say synergies are easier to see for Impala when paying R150 / share than even if Northam were to pay R150 / share. But the fact that Northam pays R180 per share [means] they’re paying almost 20% more in price and don’t have the easy synergies that the Impala will get.

FIFI PETERS: For that IRR you are talking about, just say how you are going to justify the return on initial investment.

PEDRO MAYOR: Yes, the internal rate of return. That’s right. How do you justify that return? Your board of directors and shareholders must ask themselves that. No one is a better seller than Paul, but it is much more difficult for him to justify paying a 20% higher price when he does not border on the Royal Bafokeng property as Impala does.

FIFI PETERS: I know that market experts always tell us not to watch the daily news about the stock price. I did not do it. I went back to January to see what these stock prices had done since January. And wait, Northam Platinum’s stock price is up 27% since the beginning of the year. Impala’s stock price has risen 3.6% since the beginning of the year. Then you have Royal Bafokeng, which beats them all. That stock price has essentially more than doubled because it’s up 113% since January. I want to know: am I supposed to follow the herd and put my money into Royal Bafokeng Platinum, as seems to be the case with the broader investment community?

PEDRO MAYOR: Well, it’s a bit more now, because Northam isn’t going to pay R180 / share, I think, for one more share. You have already seen their ad. They bought a few more shares and paid an average of, I think, R162 / share. Would Impala pay a little more? Possibly, but not much. I think now there is a better value. The race is over. You had to be at Royal Bafokeng until Impala raised the offer to R150 / share. You can’t go in now and think you’re going to make it through the rest of the year.

FIFI PETERS: We are talking about the end game, and the end game or the one that becomes the winner is the one that gets 51%, if that’s the scenario we end up with, because it is possible that neither of us will get it. 51%. Perhaps one has a little more control than the other, as is currently the case where Northam leads; But maybe it is a situation where you are more balanced. In that sense, these two people have to work together at the same table. You see that is happening, and successfully?

PEDRO MAYOR: I make. I see it as a moderate success, but someone has to get more because, if you have two heavy hitters sitting there at 35%, they both want to drive this bus. Therefore, it will be difficult for a board to make strategic decisions here until this issue is resolved. It could be six months from now. Northam cannot offer less than R180 per share for six months. Impala cannot offer less than R150 for six months.

Let’s say the price of platinum really starts to run, Impala would probably have to pay more to get it. Now let’s say the price of PGM starts to fall, people will find it easier to sell their shares to Impala at R150. Northam will definitely not touch your stocks. So I think a lot of analysts are praying that if PGM prices start to get out of Impala, enough stocks can be sucked in to get 51%.

FIFI PETERS: But Northam, in their initial offering on R180, I remember there were some who said that the R180 / share was where they were possibly overpaying; Of course, the R180 / share was offered to a very select group of investors in the form of Royal Bafokeng Investment Company; he did not give himself up to everyone else. Do you think maybe they got boxed in? [in] and they limited how they could move here having excluded the majority of the minority shareholders?

PEDRO MAYOR: Yes. They’ve certainly created walls around them, which makes it much more difficult for them to maneuver than it is for Impala. Yes, definitely Fifi. By offering that R180, you are drawing a very difficult line in the sand. It means that you can’t offer anyone less than that for six months.

FIFI PETERS: Absolutely not. I would not accept it. Peter, we’ll leave it there, for now, while we wait for the last or the next move from either party.

That was Peter Major, the Mining Director for Mergence Corporate Solutions, talking about the battle for RBPlats between Impala and Northam.


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