Implats has been steadily building up its holding in RBPlat to above 39%, while Northam holds out for a favourable Competition Tribunal appeal. From Moneyweb.
The battle between Impala Platinum and Northam Platinum for control of Royal Bafokeng Platinum, now almost a year in the brew, has hit the home stretch.
Implats first announced it was in negotiations to acquire 100% of RBPlat in October 2021.
Northam unexpectedly entered the fray shortly thereafter when it acquired 33% from Royal Bafokeng Holdings.
Implats argued that Northam never had a clear strategy to take the deal further and extend the same offer to all other shareholders.
But the entry of two bidders into the race boosted the value of RBPlat, prompting Implats to raise its offer to R90 cash and 0.3 in Implats per RBPlat share acquired.
That offer nabbed it about 35% of RBPlat, which it has steadily increased to just above 39%, as announced by Implats on Thursday.
RBPlat endorsed the Implats offer in February this year.
It’s been a frustrating year, with neither side able to engage with RBPlat while there is an offer outstanding. It also stymies any strategic plans RBPlats might want to pursue.
The prize for the contending bidders is one the best platinum group metal (PGM) deposits in the southern hemisphere, relatively easy to access and cheap to mine. Northam believes RBPlat’s PGM deposit complements its own orebodies and has expressed concern that with Implats in the driving seat and taking control of RBPlats’ PGM concentrate, smaller PGM producers may be prejudiced.
That’s refuted by Implats. “We will honour third party contracts and with the additional capacity that we are constructing we would be in an even stronger position to compete for additional concentrate that may become available,” says Johan Theron, head of corporate affairs at Implats.
Competition aspect
In April, Implats and RBPlat jointly announced that the Competition Commission had recommended the transaction be approved by the Competition Tribunal, subject to certain agreed conditions.
Northam intervened in the tribunal process, demanding access to all confidential records and full intervention rights. It was granted limited intervention rights on two points by the tribunal, which are now the subject of appeal by Northam.
These technical arguments should be settled within the next month, says Theron, at which point Implats’s offer will become unconditional, assuming the tribunal rules in its favour. The tribunal may also impose conditions on the offer.
As things, stand, these are the three main shareholders in RBPlat:
- Implats (39.1%)
- Northam (about 35%), and
- The Public Investment Corporation (9.46%).
That reduces the available free float of shares down to just a few percent once tracker funds are excluded.
“Assuming the Tribunal rules in our favour, the remaining shareholders will have the option to accept our offer or risk holding the equity with the [RBPlat] price trading back to fundamental levels, risking significant financial loss,” says Theron.
“It therefore wouldn’t make sense for shareholders to reject the offer.”
Terence Hove, senior market analyst at Exness, says the bidding war between Implats and Northam is shaping up to be down to which management team will ultimately have the most sway within the market.
“These odds will likely be further tilted by the ‘king-maker’ in the form of the PIC, which has about 9.46% in RBPlat,” he adds.
“With Implats’s recent acquisitions in RBPlat, this inches the battle in their favour – bringing their total holding to more than 39%.
“It may come down to which team manages to negotiate with the PIC for its shares, thereby likely concluding the bidding war,” says Hove.
“Implats moved to accumulate the remaining shares it does not own already to attain majority shareholding from the publicly held shares.”
Read: PIC is key to platinum takeover battle
The other factor weighing in favour of Implats is its considerable war chest, something Northam cannot match.
Implats posted its results for the year to end-June on Thursday – and it shows a net cash tally of R26 billion at year-end.
There’s no sign of Northam waving a white flag
Its latest annual report spells out the motivation for its bid for RBPlat: “RBPlat’s mines are shallow, well-capitalised and partially mechanised. They are currently producing, have extensive life, are cash generative and have the inherent qualities to operate in the lower half of the industry cost curve.”
RBPlat has two mining assets, located about 80km from Northam’s Zondereinde and Eland operations. Getting control of RBPlat would open up some interesting project extensions for Northam, including opportunities for the processing of its concentrate.
Northam has returned R20.6 billion to shareholders over the last two financial years through the acquisition of Zambezi preference shares and Northam Platinum shares, resulting in a 28.9% reduction in issued share capital.
The problem for Northam in extending an offer to all RBPlat shareholders is its debt of R16 billion, and a further R2 billion in deferred shares still owed to Royal Bafokeng Holdings for the acquisition of RBPlat shares.
It would have to find another R16 billion in guarantees to extend the offer to all shareholders.
Implats already has those guarantees in place. It declared a final dividend of R10.50, bringing its total dividend for the year to R15.75, which was nearly a third higher than its stated dividend policy.
This was despite a 4% drop in concentrate production, and a 6% drop in refined production – largely due to maintenance required at its Number 3 furnace at Impala Rustenburg.
The race for RBPlat is not over yet, but the odds appear to favour Implats as we enter the final straight.
