The United States District Court for the Southern District of New York has denied Gold Fields‘ (GFI-N) motion for a preliminary injunction to block the early settlement portion of rival Harmony Gold‘s (HMY-N) hostile takeover bid.
Gold Fields had asked the court to block the all-share deal, alleging that Harmony was acting in concert with Norilsk Nickel (which owns 20% of Gold Fields); that Harmony’s two-pronged takeover offer was coercive; that Harmony’s gold reserve statements are misleading; and Harmony had omitted certain information from its public documentation.
Gold Fields dropped all of the allegations, except those relating to Harmony’s gold reserve disclosure prior to the court’s decision.
In its ruling, the court found that Gold Fields failed to provide satisfactory evidence that Harmony had misled Gold Fields’ U.S.-based shareholders, and that Gold Fields own expert witness agreed that Harmony’s gold reserve estimate was “justified.”
“We are pleased but not surprised by this judgment. Gold Fields’ management has embarked upon frustrating and, in our view, frivolous litigation to divert attention and to frustrate the ability of Gold Fields shareholders to assess the merits of Harmony’s offers,” said Harmony CEO Bernard Swanepoel in a prepared statement.
The loss in New York is the fourth suffered by Gold Fields’ defence strategy; previous cases filed with South Africa’s High Court, Competition Tribunal, and Securities Regulation Panel all went in Harmony’s favour. Gold Fields has filed an appeal of the High Court’s decision with the Supreme Court of Appeal, and is also appealing the Competition Tribunal’s refusal to block the early portion of Harmony’s offer. At press time there was no word if the company would appeal the New York court’s decision.
Meanwhile, Gold Fields says that Institutional Shareholder Services (ISS), the world’s leading independent provider of proxy voting and corporate governance services, has recommended that Gold Fields shareholders vote in favour of their company’s planned asset merger with Iamgold (IMG-T). That plan will be put to shareholders on Dec. 7.
ISS’ report also concluded that the Harmony tender offer was not in the best interest of Gold Fields shareholders “based on the current offer level, the offer structure, and concerns over disclosure.”
The same group previously recommended that Harmony shareholders approve their company’s bid for Gold Fields.
Harmony’s unconditional early-settlement offer expires on Nov. 26. The offer stands at 1.275 of its own shares for each Gold Fields share. The exchange ratio implies a value of US$13.68 for each Gold Fields share, based on each company’s closing share price in New York on Nov. 23.
News of the court ruling sent each company’s shares lower on Nov. 23; Gold Fields ended off US55 at US$14.20, while Harmony fell US47 to $10.73.
In related news, Harmony says that shareholders tendering to its early offer would be entitled to any increase in the follow-on portion of its offer, even if those shareholders had disposed of their Harmony consideration shares. Harmony expects it would make such payments ahead of the expiration of the follow-on offer.
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