Monday, January 24

Battle for SA’s platinum miner comes to the boil

Tensions in the battle over the acquisition of one of South Africa’s smallest platinum miners, Royal Bafokeng Platinum, escalated on a day plagued by statements to the Johannesburg Stock Exchange.

It started on Thursday with Royal Bafokeng, also known as RBPlat, announcing that Northam Platinum Holdings Ltd. had taken an unsolicited approach to buying some or all of its shares. Northam later said that the stake it had built in RBPlat so far would not trigger a mandatory offer for all shareholders. Soon after, rival Impala Platinum Holdings Ltd. said it now owned 35.31% of RBPlat as it sought control of a miner that is key to extending the life of its own deep-level operations.

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Read: Implats ups the ante, ready to make a mandatory offer for RBPlat

Implats revived its search for the smallest producer late last month, following Northam’s decision to buy RBPlat’s largest shareholder. Implats has always wanted to own RBPlat’s low-cost mechanized assets, which are located adjacent to its own Rustenburg mining complex. Now CEO Nico Muller faces a battle with his Northam counterpart Paul Dunne.

“It will be the one who will present the best offer,” said Rene Hochreiter, analyst at Noah Capital Markets Ltd. “Northam will have to make a cash offer because Implats will present a cash offer. ”

RBPlat said Northam’s unsolicited approach does not include details of the offering, with Northam asking for due diligence. Previous talks with Northam about a possible offer ended after its board rejected a non-binding offer letter dated October 11, RBPlat said.

On November 29, Implats made a cash and stock offer of rand 150 per share to RBPlat shareholders, valuing the company at approximately R43.4 billion ($ 2.7 billion). That offer, backed by RBPlat’s board, came after Northam agreed to pay RB180 per share for a 32.8% stake in RBPlat. Northam has since raised its stake in RBPlat to 34.95% and said Tuesday it has options to increase that stake to 38.27%.

Acquisition rules

Northam would have to pay RBPlat 180 per share to other RBPlat investors if it makes a blanket offer within six months, according to analysts at RMB Morgan Stanley. Under South African acquisition rules, a mandatory offer to other shareholders would be triggered if their stake in RBPlat increases to 35%.

Northam’s potential offer to minorities “would have to match the best price paid to holders of the same class of securities in the previous six months” and the transaction may also require shareholder approval, analysts said.

South Africa’s Public Investment Corp., the continent’s largest money manager, is a keen observer. It owns about 10% of RBPlat, but also participates in Implats and Northam, and said it would support “any transaction that can demonstrate benefits for its clients.”

The ball appears to be in Northam’s court as it weighs a bid, though operational considerations may play a role as well. The potential synergies between RBPlat and Northam are less attractive than those of Implats, said Shane Watkins, chief investment officer at All Weather Capital Ltd.

“The risk is that Northam overpays due to the lack of mining synergies with Royal Bafokeng’s assets,” Watkins said.

© 2021 Bloomberg

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