Implats to smoke out Northam’s intentions for RBPlat after saying it would close bid in weeks

Nico Muller, CEO, Impala Platinum

IMPALA Platinum (Implats) CEO Nico Muller said the company would close its takeover bid for Royal Bafokeng Platinum (RBPlat) at the month-end – a development that is likely to smoke out Northam Platinum’s ambitions with respect to RBPlat.

Muller said Implats expected an outcome to Competition Appeal proceedings “in the next few days” in which Northam has argued Implats’ offer for RBPlat is prejudicial to the rights of smaller miners in South Africa’s platinum group metals (PGM) industry.

“What I will say is that our closing date is the end of September and we have very little appetite for continued extensions beyond that,” said Muller in a presentation to media of the group’s year-end results. “It is important that we have closure on fairly urgent basis.”

In terms of its takeover offer, launched in January and since extended twice, Implats has offered a combination of R90 in cash and 0.3 Implats per RBPlat share. Its last stated stake in RBPlat as of today was 39.13%.

Northam has a 34.5% stake in RBPlat with options to increase its holding to about 38%. Paul Dunne, CEO of Northam said earlier this year he wanted to control RBPlat which he described as offering the best PGM production potential in South Africa.

RBPlat has guided to production this year of 505,000 oz of 4E metals in concentrate. It produced 225,500 oz in the six months ended February but unit costs slipped significantly prompting its CEO Steve Phiri to state that uncertainty in respect of Implats outstanding offer for the company had distracted the company and created uncertainty.

“We can’t engage with RBPlat [while the bid is outstanding] and the sooner we come to a conclusion the sooner the parties can get around the table and optimise value for all stakeholders going forward,” said Muller.

End game

The government-owned Public Investment Corporation (PIC) is the kingmaker in respect of RBPlat because it hasn’t decided whether it will vend its shares in RBPlat – standing at just over 9% – into Implats’ offer.

“Our bid for RBPlat is providing a floor to the RBPlat share price,” said Muller in an interview with Miningmx. He added that the PIC risked significant value loss if it allowed the Implats offer to close without supporting the bid.

There is confidence in Implats it was unlikely the Competition Appeal will support Northam’s objections and extend its rights. Even were that to happen, Implats would still close its offer and settle at maximum stake of about 42% – the level deemed the outright control threshold by the Takeover Regulation Panel.

Muller said the PIC would have about two weeks to decide on Implats’ offer once it announced its intention to close its offer. He added that a framework agreement with the South African government’s Department of Trade and Industry locking in “public interest benefits” should it end up owning 50% plus a share of RBPlat coalesced government support for its bid.

Other factors weighing in Implats in respect of its bid for RBPlat is a R16bn in guarantees. Muller told Miningmx that the dividend to shareholders could have been as much as 58% of free cash flow had this guarantee not been required. The guarantee is the potential cost to Implats of outstanding RBPlat shareholders accepting its bid.

Implats today announced a final dividend of R10.50 per share taking the total dividend for its 2022 financial year to R15.75/share equal to 48% of free cash flow – and higher than the 30% set down in its dividend policy.

What will Northam do?

Northam’s Dunne said in March that “we descire to control the asset”, adding that “There are a number of potential outcomes other than the obvious”.

Speaking at the firm’s annual results presentation last week he provided little in the way of illumination saying “we prefer to keep our own counsel”.

That position is likely to alter significantly in the coming weeks especially as the open option the PIC has over RBPlat shares is to disappear.

Analysts have questioned the ability of Northam to afford a bid for RBPlat. Its net debt as of end-June was about R16bn with R2bn of deferred share payments to the Royal Bafokeng Holdings still due. Alet Coetzee, Northam CFO, told Miningmx however that the company expected to deleverage aggressively over the next 12 months.

An analyst told Miningmx today that if Northam counter-punched Implats had the firepower to increase its own offer, effectively transforming the race for RBPlat into a full bidding war. As of end-June, Implats had liquidity of R34.5bn and produced free cash flow of R28.8bn.