Implats likely to cut Northam bid by R8bn
January 13, 2009
By Justin Brown
Johannesburg - Impala Platinum (Implats) may reduce its offer for Mvelaphanda Resources and Northam Platinum by as much as R8 billion due to a plunge in platinum prices and a fall in Northam's share price - while Implats' share price has risen.
Analysts expect that if prices of platinum group metals (PGMs) do not recover from their recent lows, Implats could pull out of the deal to conserve cash, which stood at R10.4 billion at the end of last June.
In October Implats offered Northam shareholders 35 of its shares for every 100 Northam shares. This equated to a total of R21.2 billion for Northam and the rest of Mvela, after the unbundling of its 62 percent stake in Northam.
Yesterday the value of 100 Northam shares was equal to less than 19 Implats shares.
Analysts indicated that Implats was now likely to offer between 25 and 30 shares for every 100 Northam shares. A deal at 25 Implats shares could see Implats paying R13.2 billion for Northam and Mvela.
Since Implats made its offer in early October, Northam's market value has declined by 37 percent to R9.8 billion while Implats' market value has increased by less than 1 percent to almost R93 billion.
"Implats shares have risen while Northam has fallen due to the fact that Northam has just one mine that is difficult to operate and it has higher costs than Implats," said one analyst. "Implats has a history of better protecting profit margins."
One Implats shareholder, who wished to remain anonymous, said: "A lower ratio would be better for us. The ratio that is ultimately agreed would depend on the view on the long-term level of the platinum price."
A Northam shareholder said Northam and Mvela would be unhappy with an offer of less than 25 Implats shares for every 100 Northam shares.
"A ratio of 35 Implats shares for every 100 Northam shares is perhaps too high, too. The starting point for negotiations must be 30 Implats shares for every 100 Northam shares. The ratio that Implats [offers] is important, but what is also key is what cash Implats offers."
The same Northam shareholder said: "A difficulty with the deal is how to value the Booysendal project. I would say the deal has a 50-50 chance of falling through."
James Wellsted, an Mvela spokesperson, said the company would be "totally ignoring" the market value of Implats and Northam and would be looking at the long-term value of the two companies.
Wellsted said the deal was being renegotiated. It was to be hoped that talks would be concluded next month.
Wellsted said Implats' valuation could be affected by any adjustment to the group's capital spending plans, as well as changes to the plans for Implats' various mines, especially its Impala Lease area near Rustenburg.
Anglo Platinum, Lonmin and Aquarius Platinum have all adjusted their capital expenditure plans as a result of the recent fall in PGM prices.
Wellsted said that when talks between Implats, Northam and Mvela started, the platinum price was above $2 000 an ounce and Mvela was working on a long-term price of $1 600 an ounce. Yesterday platinum was quoted at $982 an ounce.
Implats fell 1.88 percent to R145.60, Northam fell 2.68 percent to R27.25 and Mvela added 0.4 percent to R27.50 yesterday.
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