AngloGold boosts Ashanti bid (October 27, 2003)

AngloGold (AU-N) has bumped its all-share offer for Ghanaian-based Ashanti Goldfields (ASL-N) by 11.5%.

The world’s third-largest gold producer is now offering 0.29 of an AngloGold share for each share of Ashanti, compared with the original offer of 0.26 of a share.

Based on AngloGold’s closing price on Oct. 15, the new deal is worth about US$10.82 per share, compared with US$9.70 per share under the previous exchange ratio. Overall, the offer tips the scales at about US$1.4 billion.

AngloGold’s offer, which it says is final, still lags behind that of rival Randgold Resources (GOLD-Q), which is one Randgold share for every two Ashanti shares tendered. That deal is valued at slightly under US$1.5 billion.

Ahanti’s board has unanimously approved AngloGold’s revised bid. AngloGold also has the support of Lonmin (LNMIY-O), which owns a 27.6% stake in Ashanti. Lonmin has agreed not to accept or support any bid from Randgold unless it includes a fully underwritten cash alternative. Lonmin can also withdraw its support if Ashanti’s board puts its weight behind a competing offer.

AngloGold is committed to spending US$154 million exploring and developing Ashanti’s Obuasi deeps project over the next five years. Randgold plans a longer, phased investment at Obuasi.

AngloGold’s bid still requires the approval of the Ghanaian government, which, in addition to a 16.9% interest in Ashanti, holds a “golden share,” allowing it to veto any deal that fundamentally changes Ashanti’s structure. AngloGold expects to hear from the government by the end of October. The proposed deal also needs the approval of the U.S. Securities and Exchange Commission and the Ghana High Court.

If it succeeds in its bid, AngloGold would surpass Barrick Gold (ABX-T) in terms of production, and occupy the coveted number-two spot. Newmont Mining (NEM-N) remains the world’s biggest gold producer.

The combined entity, to be named AngloGold Ashanti, would boast 93.2 million oz. of attributable proven and probable reserves (using year-end 2002 figures), and increase AngloGold’s attributable annual production of about 7.3 million oz. by about 27%.

In the end, existing Ashanti shareholders would own around 14.5% of the enlarged company versus 70% under the Randgold proposal.

For its part, Randgold says it will review its position and consider improving its offer.

AngloGold is a 51%-held subsidiary of Anglo American (AAUK-Q). Randgold & Exploration (RANGY-Q) holds a 43% interest in Randgold.