Northam Platinum gatecrashed a planned takeover of Royal Bafokeng Platinum (RBPlat), offering R17bn for a third of the company in a surprise move that knocked off course Impala Platinum’s (Implats) planned tie-up with the mid-tier platinum group metals (PGM) producer.
The clamour for RBPlat assets first came to light two weeks ago when RBPlat and Implats said they were exploring a potential transaction.
However, in the latest twist, RBPlat said on Tuesday that talks with Implats had fallen through after its biggest shareholder, Royal Bafokeng Holdings, rejected the deal in favour of selling the bulk of its 36% stake in the company to Northam in exchange for shares and cash.
The development is a massive blow for Implats, which had hoped to exploit cost overlaps between its vast mining complex in Rustenburg and RBPlat’s low-cost mechanised shafts located in the same area to create a platinum mining titan.
For RBPlat, the deal adds fast-growing Northam as a strategic investor but robs minority shareholders who had hoped to sell their stock at a premium of an easy payout. Shares in RBPlat plummeted 21% in early deals on Tuesday before recovering to trade 2.18% weaker at R117.89, valuing the mid-tier platinum miner at about R33.7bn.
Analysts questioned the logic of the deal for Northam, which does not own any mines in Rustenburg and is offering a generous 90% premium to the closing price of RBPlat before the disclosure of merger talks with Implats two weeks ago.
Its stock price shed the most since the start of the pandemic, down 14% to R208.77.
“The synergy and cost-saving benefits are not as apparent in a Northam acquisition of RBPlat. The proposed transaction by Implats and RBPlat offered a more compelling long-term shareholder value creation rationale,” said Asief Mohamed, chief investment officer at Aeon Investment Management.
Northam will acquire an initial 32.8% interest in RBPlat before increasing that to 33.3% in a deal that will be settled in cash and shares.
RBPlat was born out of a joint venture between Anglo American Platinum and Royal Bafokeng Holdings, the investment vehicle for the Royal Bafokeng nation, which holds a 36.1% interest in RBPlat.
Peter Major, director of mining at Mergence, also criticised the lack of strategic merit in the deal, saying it did not make sense and the premium Northam would pay is high.
“Is this an ego thing — paying the highest premium I can ever remember seeing for a mining transaction in SA?
“There definitely must be ego involved to snatch this deal out from under Impala’s nose just like that,” said Major. “But these are ‘top of the cycle’ earnings [that] the mining companies are now spending on assets pricier than they’ve ever been before.”
Northam CEO Paul Dunne said RBPlat’s asset mix complemented Northam’s, saying the assets are young, shallow and well capitalised and occupy a strategically important position in the Western Bushveld. “The transaction ... gives Northam a strategically important shareholding in RBPlat, creating significant long-term optionality for Northam,” said Dunne.
Even though mining companies are flush with cash, thanks to the supersonic rally in PGM prices, Anthony de la Cour, an analyst at Matrix Fund Managers said that Northam would be paying too much of a premium for the stake.
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