Randgold ups Ashanti ante, omits cash (November 03, 2003)

True to its word, Randgold Resources (GOLD-Q) has boosted its all-share offer for Ghanaian-based Ashanti Goldfields (ASL-N).

Under the revised bid, Ashanti shareholders are being offered 0.56 of a Randgold share (previously half a share) for each Ashanti share tendered. Based on the closing price of Randgold’s American depository receipts on the Nasdaq on Oct. 23, the offer is worth US$12.57 per share, or around US$1.7 billion in all.

Randgold says its offer represents a 10.3% premium over the closing price of Ashanti’s Ghanaian depository shares on Oct. 23, and a 12.3% premium over the current value of AngloGold‘s (AU-N) competing offer.

Randgold descibes its offer as representing a “genuine and attractive alternative to the improved final offer proposed by AngloGold” and that “there can be no guarantee that an agreement between Randgold and Ashanti will be reached or that the merger will be effected.”

Randgold’s offer is conditional on, among other things, approval by at least 75% of Ashanti shareholders.

Ashanti’s board evaluated Randgold’s revised bid and continues to endorse AngloGold’s rival bid of 0.29 of one of its shares for every Ashanti shares. AngloGold has called that bid, which recently replaced its original bid of 0.26 of a share, final.

In addition to the support of Ashanti’s board, AngloGold’s bid has the backing of platinum miner Lonmin (LNMIY-O), which owns a 27.6% stake in Ashanti. Also working against Randgold is the fact that Lonmin has agreed not to accept or support any bid from Randgold unless it includes a fully underwritten cash alternative — something the new bid is lacking. Lonmin can also withdraw its support if Ashanti’s board puts its weight behind a competing offer.

Randgold CEO Mark Bristow says the new bid offers significant value and that his company does not intend to develop Ashanti in a piecemeal approach. “We believe it’s worth continuing to present our case to the Ashanti board, encouraging them to consider this a little bit more creatively, and also ensuring that the shareholders have choice. We don’t want to create a one-horse race because of one exiting shareholder.”

Bristow says he’s more concerned with winning the support of the remaining 73% of shareholders than he is with Lonmin’s approval.

While Bristow wouldn’t call the revised offer final, he said it was significant enough to “test if there is a serious commitment” to creating a commercially viable process. He said that if there is, he’ll go back to the shareholders but that he does not want to get into “a stupid predicament going forward.”

In the end, the government of Ghana, which has a 16.9% stake in Ashanti, holds the trump card — a so-called “golden share” that affords it veto power over any deal that fundamentally changes Ashanti’s structure. Any proposed deal also needs the approval of the U.S. Securities and Exchange Commission and Ghana’s high court.

In the end, existing Ashanti shareholders would own around 72.6% of the enlarged company under the Randgold proposal; the AngloGold deal would leave them with a 14.5% stake. A tie up between Ashanti and Randgold would create a 2-million-oz.-per-year producer, compared with a 7.3-million-oz. behemoth with AngloGold.