Gold Fields (GFI-N) has trimmed its proposed cash contribution under a plan to merge its international assets with those of Iamgold (IMG-T) by US$200 million to around US$150 million.
The deal’s other terms remain unchanged, and would see Gold Fields end up with 70% of the enlarged Gold Fields International (T.N.M., Aug 23-29/04). The pair say that in the wake of Harmony Gold‘s hostile advances, extensive shareholder canvassing, and the recent relaxation of South African exchange controls, questions were raised about whether the original terms of the transaction were still appropriate.
Gold Fields CEO Ian Cockerill said that "limited discussions" with South African institutional shareholders holding about 18% of his company’s outstanding shares indicated 78% approval for the modified terms.
Iamgold CEO Joseph Conway says a smaller cash contribution by Gold Fields will satisfy many shareholders’ concerns without affecting the enlarged company’s prospects.
Gold Fields’ plan will be put to a shareholder vote on Dec. 7. South Africa’s Competition Appeal Court recently ruled that Harmony could not vote any of the Gold Fields shares it has acquired under the early settlement portion of its offer at that meeting. Some 10.8% of Gold Fields shares were tendered to the early offer.
In its ruling, handed down on Nov. 26 (the final day of the first phase of Harmony’s two-part takeover bid), the court concluded that Harmony’s bid qualifies as a notifiable merger for competition purposes and may not proceed until its is formally approved by competition authorities.
Taking a page out of Gold Fields’ playbook, Harmony has launched a legal barrage of its own. Harmony says it will seek leave from the court to appeal its ruling with the Supreme Court; alternatively, Harmony says it will petition the Supreme Court directly.
The company has also launched an application to have the country’s Constitutional Court overturn an existing law that makes the Competition Appeal Court the final court of appeal regarding merger reviews.
Harmony also plans to ask the Johannesburg High Court and a court in the United States to prevent Gold Fields from obtaining a discretionary proxy from the Bank of New York. Such a proxy would allow Gold Fields to vote any of its un-voted American depository shares (ADS) in its favour. Around 30% of Gold Fields’s stock is represented by ADS.
Harmony says Gold Fields is obliged to notify the Bank of any “substantial opposition” to the proposed Iamgold deal, and its materially adverse affect. Harmony says the bank should not grant the proxy, as it will enable Gold Fields to force through its Iamgold plan against the wishes of a substantial number of its shareholders.
Harmony used a similar proxy in a recent shareholder vote that approved its plan to take over Gold Fields.
The second half of Harmony’s two-part takeover bid hinges on Gold Fields planned asset merger with Iamgold being rejected by Gold Fields’ shareholders. The offer stands at 1.275 Harmony shares for each Gold Fields share tendered.
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