Court deals late deathblow to Harmony bid

Fittingly, the seven-month battle between Harmony Gold Mining (HMY-N) and Gold Fields (GFI-N) has ended in a courtroom, with South Africa’s High Court ruling that Harmony’s hostile bid had actually lapsed on Dec. 18, 2004.

The ruling means that since that date, there has effectively been no offer under which Gold Fields securities could be tendered, accepted, and settled. Also, any Gold Fields shares acquired since then must be returned to their original owners.

The Court found that South Africa’s Securities Regulation Panel (SRP) had erred in allowing an extension to Harmony’s bid beyond the normal 60-day limit. Harmony originally launched its all-stock bid on Oct. 18, 2004.

In the end, the ruling does little to change the results of Harmony’s bid, as few investors tendered their shares after December, instead waiting for Harmony, who’s shares were on the slide, to sweeten its offer. The anticipated sweetener never emerged during the often acrimonious battle, which saw a barrage of lawsuits and appeals from both sides. Harmony will release the final results of its offer by May 23.

Earlier this month, Harmony announced that its original offer of 1.275 of its own shares for one Gold Fields share was unconditional, with an expiry date of May 20, the same day as the High Court’s ruling. Under South Africa’s takeover code, unless the SRP otherwise consents, an offer must become or be declared unconditional within 60 days of its initial posting, failing which it will lapse. Gold Fields successfully petitioned the High Court to set aside the SRP’s ruling. The court also ordered that the SRP and Harmony pay the costs of Gold Field’s application.

The latest court ruling also precludes Harmony from making any further offer for Gold Fields’ shares until Dec. 18, 2005, and that the offer cannot be revised or reinstated. Harmony says it will soon decide whether or not to file an appeal.

As its stands, Harmony owns an 11.5% stake in Gold Fields; the shares were acquired under the early settlement portion of the company’s two-phase offer; that offer expired on Nov. 26. Harmony is currently considering the fate of the shares.

When the dust settled, the battle (5 months of which were fought in vain) ended up costing Harmony an estimated 159.1 million rand (US$24.5 million), and Gold Fields, 170.4 million rand (US$26.2 million). Those figures do not include the millions carved from each company’s share value. Harmony’s share price has been nearly halved to about US$6.85 in New York since the bid was launched; Gold Fields shares are off about 32% to around US$9.75.

Meanwhile, Harmony says it will lay off 11,780 workers, or 45% of its workforce, at older shafts in its Free State operations in July. The cuts include nearly 5,000 layoffs that were held up in early May after a Labour Court ruling that said Harmony had failed to follow proper procedures.

This time around, the company is employing a facilitator from South Africa’s Commission for Conciliation Mediation and Arbitration (CCMA) " to ensure that the principles and rationale for the restructuring, and the legal process surrounding the restructuring are properly monitored and adhered to."

The CCMA is a publicly funded, independent dispute resolution body.

“We will obviously look at all the alternatives to forced retrenchments, like voluntary retrenchments and other measures, particularly as we have had considerable successes in this regard at our Elandskraal, Evander, Orkney and Randfontein operations,” said Harmony CEO Bernard Swanepoel.

Harmony says the restructuring will see its gold production level slip by about 300,000 oz. to around 3 million oz. per year.