AngloGold considers legality

AngloGold (AU-N) has fired the latest shot in the war of words over Newmont Mining‘s (NEM-N) proposed three-way deal with Normandy Mining (NDY-N) and Franco-Nevada Mining (FN-T).

On Monday, AngloGold announced that it would commence action at the Australian Takeovers Panel to challenge certain aspects of Newmont’s proposed deal.

AngloGold’s CFO, Jonathan Best, said, “AngloGold considers that Newmont’s offer is a high-risk proposition for Normandy shareholders. We consider that the comparative analysis which Newmont has presented in selling its offer and its characterization of AngloGold are misleading in a number of ways.”

Best also said that Newmont’s proposed takeover bid “contravened fundamental aspects” of Australian takeover law and policy.

Formed last year, Australia’s Takeovers Panel replaces court hearings over some corporate matters and has the power to block takeovers.

AngloGold said it will ask the panel to set aside an option agreement between Newmont and Franco-Nevada covering Franco’s 19.9% stake in Normandy. It is also seeking the removal of Newmont’s condition that it must obtain 50.1% of Normandy before the Franco merger would kick in, and that Newmont’s offer for Normandy be dispatched after the Franco merger is completed. AngloGold is concerned that:

• special benefits are to be given to Franco Nevada that are not being offered to other Normandy shareholders (in particular, the merger proposal pitched at a significant premium to the market price of Franco Nevada’s shares and underlying value of its assets);
• there are apparent breaches of the Foreign Acquisition and Takeovers Act; and
• the break fee arrangements between Normandy and Newmont contravene the policy of the Takeovers Panel and are unacceptable.

Alternatively, AngloGold will seek an order that Newmont must offer equivalent benefits to other shareholders (potentially worth up to A$2.25 to A$5.50 per Normandy share in addition to the announced exchange ratio) in addition to the order to set aside the option agreement.

AngloGold is also looking into the legality of Newmont’s proposal in other jurisdictions, including Canada, and is considering legal proceedings in those jurisdictions.

Initially, Newmont’s scrip-based bid for Normandy was valued at about A$3.8 billion, trumping AngloGold’s A$3.2-billion scrip offer. Based on recent share prices, the difference between the bids has narrowed.

Steve Lenahan, an AngloGold spokesman told Reuters that a formal submission would be filed with the panel in the next day or so, and that a decision should follow within two or three weeks. Lenahan added, “This our response on the Newmont bid. Beyond that we are simply not commenting.”

In a separate ruling on Monday, the panel removed an earlier order restraining Normandy from dispatching a target’s statement in response to AngloGold’s offer. Normandy has recommended its shareholders accept the Newmont offer.