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Oil surges past $55 in Asian trading Monday
Harmony set to bid for Gold Fields
By John Reed in Johannesburg
and Arkady Ostrovsky in Moscow
Financial Times, London
Sunday, October 17, 2004
http://news.ft.com/cms/s/5c410f94-2078-11d9-af19-00000e2511c8.html
South African gold producer Harmony, with the backing
of Russian metals giant Norilsk Nickel, is poised to
make a surprise takeover bid on Monday for Gold Fields,
the world's fourth-biggest gold producer.
Harmony, South Africa's largest domestic gold producer,
will make a merger offer to Gold Fields' board and
shareholders, including Norilsk, that could foil
management's plans to merge with Canada's Iamgold.
If accepted by Gold Fields shareholders, the offer, which
is understood to have Norilsk's support, would create the
world's biggest gold company, with combined market
capitalisation of about $10 billion and annual production
of about 7.8 million ounces. The announcement of
Harmony's proposal, most likely a share swap, is
expected to come today.
For Harmony, the deal would satisfy a desire for
more and better gold assets in South Africa, its main
country of operation. By teaming up with Harmony,
Vladimir Potanin, the Russian business tycoon who
controls Norilsk, would continue to diversify away
from Russia at a time when many of the country's
oligarchs feel uncertain about their prospects at
home.
People in Johannesburg and Moscow familiar with
the bid plan said Norilsk's backing of the Harmony
offer, if approved by shareholders, could be a
prelude to a future deal spinning off some Gold Fields
international assets.
Norilsk declined to comment on the potential bid for
Gold Fields.
Norilsk unexpectedly became Gold Fields' biggest
single shareholder in March when it bought a 20
percent stake sold by Anglo American for R7.63
billion ($1.19 billion). At the time, Gold Fields
welcomed the investment and spoke of the two
jointly exploring international opportunities.
But Gold Fields' plan to merge with mid-sized
producer Iamgold, announced in August, is
understood to have angered Norilsk, which felt it
was not properly consulted. The Russian company
would see its stake in Gold Fields' international
operations diluted by plans to list them separately
in a new company 30 percent owned by Iamgold.
It is understood the Russian company has not yet
endorsed the Iamgold deal and recently stopped
returning calls from Gold Fields executives. "They're
not acting like a good, supportive shareholder," a
person close to one of the companies said.
Ferdi Dippenaar, Harmony's marketing director,
declined to comment on what he called "speculation
or rumours."
Wille Jacobsz, Gold Fields' corporate affairs head,
also declined to comment but confirmed that Norilsk
had not yet expressed support for the Iamgold
transaction.
Gold Fields is set to hold its annual meeting on
Nov. 16 and shareholders will be asked to vote on the
proposed Iamgold merger in early December.
By supporting Harmony's alternative offer to Gold Fields
shareholders, Norilsk would be able to realise its
international aims without falling foul of the South
African government's strict foreign-exchange controls,
aimed at preventing capital flight. Under these rules, to
buy control of Gold Fields with market capitalisation of
about $7 billion as of Friday Norilsk would need to offer
cash.
But the company's free cash was $1.2 billion at the end
of March 2004.
Last year Norilsk also bought a controlling stake in
Stillwater Mining, a U.S. platinum and palladium
producer, for $300 million.
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