THE jury was out on Sibanye Gold’s $1bn rights issue the proceeds of which will be used to fund its $2.2bn takeover of US-based platinum and palladium miner, Stillwater Mining.
That was the view of Piet Viljoen, chairman of asset management company, RE:CM, who said that using shares to finance significant acquisitions often “went backwards”.
“We think issuing equity to fund transactions is a very expensive form of acquisition currency,” he said. “They grow by issuing shares, but things can go backwards.
“I prefer to say let’s give them the benefit of the doubt. We need to see whether in time this one will be different, but I’m not sure. I’m undecided,” he said. RE:CM was a shareholder in Sibanye Gold.
Sibanye has embarked on a roadshow for a $1bn bond which it will use to partly repay a $2.65bn bridging finance raised to finance the Stillwater deal which recently won shareholder support at Sibanye and Stillwater.
S&P Global Ratings recently assigned a preliminary B+ credit rating for the bond issue and gave it a positive outlook in terms of its strategy to become a global precious metals company.
The reception among analysts, however, is that Sibanye has paid a full price for Stillwater whilst shares in the company were down 35% after the rights issue were announced.
Analysts said the rights issue – priced at R11.28 per share – represented a 60% discount to Sibanye’s close on May 18 of some R28.48/share. The counter-argument from Sibanye is that in exercising the rights shareholders retain their exposure to the company.