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Impala cools its heels on R21bn takeover
Allan Seccombe
Posted: Wed, 19 Nov 2008
[miningmx.com] -- IMPALA Platinum is not able to justify the R21.2bn offer it proposed early in October to acquire Mvelaphanda Resources and Northam Platinum, the owner of the 100 million oz Booysendal property, but that talks were continuing between the companies.
A sharp fall in the platinum price, which has left nearly half of southern Africa’s platinum industry “under water”, and troubled capital markets have made it “increasingly difficult” for the companies to agree a satisfactory exchange ratio, Impala said in a statement.
“Implats remains interested in pursuing a transaction with Mvela Resources and Northam,” it said.
“However, Implats is not able to proceed with the Proposed Transaction on the basis of an exchange ratio of 35 Implats shares for every 100 Northam shares in the current market environment.”
Impala shares ended 2.2% down at R113.50. Mvela
gained nearly four percent to close at R23.78 and Northam was unchanged at R28.50.
Miningmx’s Brendan Ryan wrote early in November that the prospects of the deal going ahead were not good, based on the companies’ share prices and the low prices of platinum group metals.
The ratios between Impala and the other two companies have indicated the market didn’t believe the transaction would go
ahead, he said. Some shareholders, he argued, might prefer to see Impala conserve its cash resources in current market conditions.
Impala has conducted due diligences into both companies.
“The Parties believe in the merits of the proposed transaction and are continuing discussions,” Impala said.
Analysts said they did not think the deal was dead in the water because Booysendal was too important for Impala.
"Strategically this is something Impala really needs. It's not a luxury they can just walk away from," said RBC Capital Markets analyst Leon Esterhuizen.
Impala’s strategy in making a play for Mvela and Northam was to get its hands on the Booysendal prospect, which is shallow, making it quick and cheap to bring into production relative to the other projects in its pipeline that are deep and will take billions of rands and at least a decade before the first platinum is extracted.
Booysendal would also dilute Impala’s
exposure to the high-risk Zimbabwe, where the bulk of its resources lie. Impala CEO David Brown has said large investments will not be made in Zimbabwe until there is a return to a settled political and economic environment.
"Don't forget, Mvela said there were multiple bidders. If Impala drops its revised offer too far and the others aren't impressed or the other guys think they can do better, Impala's going to lose this," Esterhuizen said.
"I think the bid will come down a bit, but if it's 20% down from the original level I'll be very surprised," he said.
Wednesday's joint announcement puts into context Northam's highly unusual operational update released early this week, highlighting its improved production and profitability over the past four months, and pointing out its sizeable cash holdings of R917m and that it is still working on the Booysendal feasibility to be completed in third quarter 2009.
This is not the first big platinum
transaction to founder in the current market conditions. Xstrata pulled back from its offer to Lonmin shareholders, instead settling for the cheaper option of buying the maximum stake of 24.9% in the world’s third-largest platinum producer without triggering a mandatory offer to minority shareholders.
Lonmin has extensively reviewed its operations, shutting some and easing back on mechanisation to drive up production and lower costs. It is laying off at least 1,600 people.
Impala unveiled its proposal to wholly acquire Mvela and Northam through a series of inter-conditional transactions on 2 October.
“Although platinum and other PGMs are trading at 3 year lows, the long-term outlook for the platinum sector remains positive,” Impala said on Wednesday.
“The Parties continue to believe in the strategic rationale and benefits of the proposed transaction which would uniquely position the combined Implats, Mvela Resources and Northam group as a
leading South Africa-listed company with meaningful empowerment credentials and a diverse portfolio of platinum assets,” it said.
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