IT’S all eyes on Impala Platinum (Implats) for its next move after discovering with the rest of the market yesterday that Northam Platinum Holdings (NPH) had foiled its bid to buy 100% of Royal Bafokeng Platinum (RBPlat).
Northam agreed to buy 32.8% of RBPlat from its largest shareholder, Royal Bafokeng Holdings after offering the equivalent of R180/share in cash and shares. Northam’s offer was a 50% premium to RBPlat’s Monday close and a 90% premium over RBPlat’s share price prior to Implats’ announcement in October that it was in takeover talks.
According to JP Morgan Cazenove analysts, the attention now switches to Implats which might consider making an offer to RBPlat minority shareholders in order to forge a joint venture with Northam in RBPlats’ assets.
“The immediate question is whether Impala is motivated to react to this aggressive move by NPH to make its own acquisition offer for a minority stake in RBPlat or the full residual 64% of RBPlat shares outstanding (which have a value of about R22bn),” the bank said.
This would create a joint venture across the contiguous Implats and RBPlat lease areas. “Such an outcome could result in NPH interjecting itself into shared financial synergies which could alter the idea NPH’s acquisition is expensive and illogical,” said JP Morgan Cazenove.
Johan Theron, spokesman for Implats, told Miningmx yesterday a joint venture was a possible course of action for the company as it was running similar arrangements on other platinum group metal (PGM) assets in South Africa and Zimbabwe.
In the absence of a joint venture, Northam’s stake in RBPlat, which it transacted directly with Royal Bafokeng Holdings without the knowledge of its listed investment RBPlat, leaves Implats with the significant overhang of limited life of mine at its Rustenburg operations, said RMB Morgan Stanley.
Analysts were also left grasping at the strategic benefit of NPH buying the RBPlat stake. According to Arnold van Graan, an analyst for Nedbank Securities there are some technical synergies NPH can share with RBPlat while simultaneously bolstering its black economic empowerment credentials.
Northam would also benefit from a 50% of future metals offtake and exposure to some of the minor metals RBPlat produces.
“The premium is a function of the highly competitive environment, in our view given that Impala was bidding for the same asset,” said Van Graan.
“Essentially Northam had to pay up to block the Impala deal and to keep alive the possibility of securing the full asset at a later stage, if not, the possibility of getting exposure to these assets would be lost,” he said.
Analysts think, however, that the transaction as it currently stands is dilutive to Northam, hence its share price weakness on Tuesday, down about 15% on the day.
Shares in the company were just under 1% stronger in late afternoon trade in Johannesburg. RBPlat was trading 4.8% higher whilst shares in Implats were nearly 3% higher.