Gold Fields rejects $8bn offer from Harmony

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The Independent Online

Gold Fields, the South African gold producer, yesterday spurned a surprise US$8bn (£4.4bn) takeover bid from its smaller rival Harmony, setting the stage for a potential bidding battle.

Gold Fields, the South African gold producer, yesterday spurned a surprise US$8bn (£4.4bn) takeover bid from its smaller rival Harmony, setting the stage for a potential bidding battle.

Although merging with Harmony would create the world's biggest gold company, Gold Fields said the all-share approach undervalued its assets, reiterating its intention to press ahead with a planned tie-up with Canada's Iamgold.

But Gold Fields' attempt to merge its international assets with those of Iamgold could run into trouble after its biggest shareholder, Russia's Norilsk Nickel, threw its weight behind Harmony's proposal. The metals company's chief executive, Mikhail Prokhorov, said: "Norilsk Nickel has decided to vote its shares in Gold Fields against the Iamgold transaction and in favour of the Harmony proposal." Investors are due to vote on the Iamgold proposal in December.

Gold Fields said Harmony's offer "completely disregards the significant value that will be created from the Iamgold transaction". In a direct appeal to Vladimir Potanin, the Russian oligarch who controls Norilsk, Gold Fields urged shareholders to back its stated strategy of pursuing the Iamgold deal.

Mr Potanin, who took a 20 per cent stake in Gold Fields in March, is understood to have been upset at not being properly consulted over the Iamgold tie-up. If the deal with Iamgold goes ahead, Norilsk's stake in Gold Fields' international operations will be diluted under plans to list the overseas business separately in a new company to be 30 per cent owned by Iamgold.

Harmony has offered 1.275 new shares for each share in its larger rival. It said the offer valued Gold Fields at $8.1bn and represented a premium of 29 per cent. Bernard Swanepoel, Harmony's chief executive, said: "The immediate premium in our offer represents tangible value that can be realised today, rather than betting on a dubious re-rating scenario which is the foundation of the Iamgold transaction. Our proposal allows Gold Fields shareholders to realise the true value of the companies' international and domestic assets."

Ian Cockerill, Gold Fields' chief executive, countered by asking why his investors should consider backing a loss-making company. Gold Fields attacked Harmony for "vastly" overvaluing its asset contribution to any potential partnership and said Harmony's cost of production had "significantly lagged" its own over the past year.

Harmony's offer hinges on Gold Fields dropping its plans to merge with Iamgold. A successful bid would create a company controlling the world's biggest bank of gold reserves, producing 7.53 million ounces a year.

Gold Fields last night justified its "firm" belief in its proposed Iamgold deal on the grounds that it would create an international platform for "aggressive growth with full access to international debt and capital markets". But analysts said Harmony's offer looked more attractive to Gold Fields shareholders than a partial merger with Iamgold.

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