NORTHAM Platinum brought its 18 month battle for control of Royal Bafokeng Platinum (RBlat) to a swift end today announcing the termination of its proposed offer following a slump in metal prices.
Triggered by a major correction in the price of rhodium, which has dragged down the average rand basket price for platinum group metals (PGMs), Northam said it had notified RBPlat shareholders its offer has been terminated “with immediate effect”.
This is likely to push the Government-owned Public Investment Corporation (PIC) into accepting the R150 per share offer for RBPlat by Impala Platinum (Implats), launched in January last year.
Implats will subsequently own just over 50% of RBPlat. It currently controls about 41% of the stock to Northam’s 34.5% share in the company. The PIC has a 9.9% stake in RBPlat.
Detailing the reasons for withdrawing its proposed R172.70/share offer for RBPlat, Northam said a condition to the transaction was it would notify RBPlat’s shareholders of a material adverse change 10 days after it occurred.
It said the closing price of rhodium had fallen and remained below $9,000 per ounce for 12 consecutive trading days while the closing 4E rand basket price had fallen and remained below R33,000 per ounce. This was assuming a split of metals produced by Northam of 60% platinum and 30% and 9% for palladium and rhodium respectively.
“Accordingly, material adverse changes have occurred in respect of two separate metrics,” said Northam adding that as a consequence “the Northam offer circular and the Northam transaction circular will not be issued and a general meeting of Northam shareholders to approve the implementation of the offer will not be convened”.
Johan Theron, spokesman for Implats said today’s development did not “necessarily change anything for us. We have been very clear on process and timelines.”
Implats CEO, Nico Muller said in March his company would consider withdrawing its takeover offer for RBPlat given the time it was taking to conclude the deal. He was referring to legal objections Northam had placed in the way of Implats’ RBPlat offer with the Government’s Takeover Regulation Panel. Muller also expressed some scepticism regarding the effectiveness of a joint venture between it and Northam in RBPlat.
However, a joint venture seems the likeliest outcome following Northam’s announcement today, especially as Northam CEO, Paul Dunne commented at the firm’s interim results presentation last month he was “not a seller” of its existing stake in RBPlat.
One caveat to that, however, is if Northam found shareholder support for its proposed offer – with the April 28 circular publication date fast approaching – difficult to come by. Northam could sell its RBPlat shares into the Implats’ offer, but it would be at a significant discount given it paid just over R180/share for its beachhead stake in RBPlat in November 2021.
Said Theron: “Hopefully this simplifies the decision-making for shareholders as there is now only one effectively open to them, as it always has been”.
The rhodium price has fallen about 70% in the last year. Henk de Hoop, CEO of SFA Oxford, an industry research house, commented at the PGM Industry Day two weeks ago that the rhodium price could fall further given its history of high volatility.
The metal’s market was notoriously illiquid and would have been effected by an announcement from China Jushi it was handing back R8bn worth of the metal – about 50,000 oz – to the market. “In a market where 80% is held in long-term contracts, there’s a lot of pain to be had,” he said.