[miningmx.com] — A deal where, at the very least, the terms will be subject to major change is Impala Platinum’s bid for Northam/Mvela Resources.
The initial ratio was 35 Impala per 100 Northam. With Impala at R165.75, this was a 28% premium to Northam’s 4 525c. For Mvela, the terms were more complicated, so let’s stick to Northam.
One might have thought intuitively that share-swap transactions would not be affected by a bear market. But not so; even in the short time since the original terms were announced on 2 October, a second-tier platinum stock like Northam has shed a third of its value, Impala barely a quarter.
Northam is now 2 180c, Impala R104.10. My calculator suggests that this is equivalent to a premium of no less than 67%, which is obviously unacceptable to Impala. So it’s back to the negotiating table.
Northam is by no means the worst performer, by the way. Jubilee and Eastplat have halved in the same period. But what the Northam price tells us is that, while it was to some extent supported by bid prospects, there were always strong doubts in the market whether the takeover would go ahead.
So what now? It’s debatable which company needs a deal more.
This may seem an absurd statement, given the relative status of the two, but Impala must be concerned that it has pinned so much of its growth plans on an ever more tottering Zimbabwe, while the outlook for perennial battler Northam has been transformed by the implementation of its Booysendal acquisition.
Indeed, Booysendal is the plum for Impala. It didn’t move on Northam until Booysendal was firmly in the bag. But that doesn’t affect the principle.
It’s common cause that current market conditions create opportunities for corporate predators.
But while it’s understandable that cash deals are vulnerable to falling share prices – at 854.60p, Lonmin is just 26% of the GBP33 Xstrata was considering bidding at, in August – the Northam/Impala/Mvela saga reminds us that relative share price movements count, so even paper-financed deals can go wrong.
