Sibanye clears anti-trust condition as ‘first step’ in Stillwater bid

Neal Froneman, Sibanye-Stillwater CEO

NEAL Froneman, CEO of Sibanye Gold, described approval of US anti-trust conditions as “an important first step” in its audacious R30bn takeover of Stillwater Mining, a US-based palladium and platinum firm.

“Satisfying the HSR [Hart-Scott-Rodino anti-trust law] antitrust condition in a timely manner is an important first step towards concluding the acquisition of Stillwater,” said Froneman in an announcement.

“We have made very positive progress since the announcement of the transaction and continue to work towards satisfying the outstanding conditions as soon as possible,” he added.

Sibanye Gold said that it expected to close the transaction in the second quarter of this year, but the deal faces a raft of other regulatory approvals, not least that of shareholders in both Sibanye and Stillwater.

For instance, some 75% of Sibanye shareholders must give the thumbs-up to a rights issue of at least R10.3bn which is about the third of the firm’s current market capitalisation.

JP Morgan Cazenove described the offer as “a very full price” as well as “significant balance sheet risk” owing to some $865m of debt reduction that would have to take place for Sibanye to reach a reasonable level of net debt compared to its underlying earnings.

Sibanye unveiled the bid for Stillwater on December 9, a transaction that internationalises the South African firm and increases its platinum group metal (PGM) output 50% to 1.6 million oz.

Once Stillwater has completed its $175m to $190m Blitz project, however, PGM production could be closer to about one million oz/year, Froneman said. The palladium:platinum split was about 78%:22%, he added.

This will make Sibanye the world’s third largest palladium/platinum producer and the fourth largest 4E PGM producer – all brought about by one of the largest transactions corporate South Africa has seen in many years.

Sibanye will offer $18/share for Stillwater, equal to R30bn, which represents a 23% premium to Stillwater’s share price as it closed on the prior day, and 20% to Stillwater’s 20-day volume-weighted average closing share price.