Implats ups ante, set to make mandatory offer for RBPlat

FIFI PETERS: There is a hot competition happening in South Africa’s platinum sector at the moment – in fact sizzling, in my humble view – and the contenders are two mining companies, Impala Platinum and Northam Platinum. The prize, it would seem, is the assets of Royal Bafokeng Platinum. All three companies came out with an update today on the JSE, the latest being Impala, which came out at 17:48, saying that it was now set to own a 35% stake in Royal Bafokeng Platinum, paving the way for it to make a mandatory offer for the company.

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We do have Johan Theron, the spokesperson of Impala Platinum joining the show. Johan, you guys have been very busy. Nonetheless, just talk to us about the latest punch that you guys have thrown in this race and what it means.

JOHAN THERON: Hi Fifi. Obviously we have to report on a daily basis every time we increase our shareholding; remember our bid only opens formally in January after we’ve posted our circular, but we are allowed [before that] to acquire on a voluntary basis shares from institutions wanting to sell to us.

Today we announced that we’d acquired another 3%, bringing the sum total up to a 35% ownership in RBPlat.

FIFI PETERS: Where are you getting all the new shares from, Johan?

JOHAN THERON: Basically institutional shareholders. Our offer has been in the market for about two weeks, so people know exactly what it is. It’s open to everybody; it’s the same for everybody and, to the extent that people contact us on a willing-buyer, willing-seller basis, we are able to conclude exactly the same transaction for each one that knocks on our door.

FIFI PETERS: What was interesting was that earlier today Royal Bafokeng Platinum issued a statement somehow signalling that a mandatory offer would be forthcoming, possibly from Northam, which issued a counter statement saying that that was misleading. And then you came out with the statement as Impala, saying that you’re paving the way and are set to make a formal bid here. Has this become personal?

JOHAN THERON: Not from our side. I think there’s absolute compelling value on our side in many respects. This deal has been in the making for 20 years with Impala. The last iteration has taken us the better part of two years, so hopefully the planets are starting to align – but in a complex way, no doubt.

FIFI PETERS: Very complex, because either a day or so before that – I’m struggling to keep up here – Northam Platinum also said that it had bought new shares. I think its present stake was around 34.9% or so, with the option to increase it to around 38%. It’s quite complex. What does that mean?

JOHAN THERON: Well, Fifi, as far as I understand, our offer is the only offer that’s available right now, and it’s the only offer that willing sellers can can transact into. As I understand it, Northam has accumulated a 34.95% stake, and there’s no formal offer to anybody out there to pursue. I think RBPlat’s announcement today, obviously if they breach 35%, like we did today, to the extent that there is an offer it becomes a mandatory offer to all shareholders.

We don’t mind that. It was always our intention to make exactly the same offer to everybody, so for us it was just a technicality today that we passed the 35% mark.

FIFI PETERS: People have been watching this closely and commenting on a possible race to 51% – although I suppose no one can actually be in that position, either yourselves or Northam Platinum. Is that correct?

JOHAN THERON: No. I think technically it is possible, but it would obviously require the majority of the remaining shareholders to sell to either one or two parties. Should Northam come up with an offer, then they could sell to Northam, but at this stage our [offer is] the only one available there. It is however conceivable that neither party gets to 51% and we both end with a large stake with some minorities still in the structure.

FIFI PETERS: In the second scenario that you paint, in which you both end up with this minority stake, this race is feeling very hostile from those of us who are reading the updates and watching you closely. Is that the case and, if that’s the case, would you be able to work with Northam?

JOHAN THERON: Yes, absolutely. I think there’s no problem from our side. We have very successful relationships with peer companies, competitors so to speak, where we operate with Sibanye-Stillwater at our Mimosa Mine in Zimbabwe, and with ARM Platinum at the Two Rivers Mine. So it’s certainly possible in our experience, and we look forward to unlocking value with Northam Platinum.

FIFI PETERS: In terms of some of the transactions that they also announced a little earlier this week, the fact that the CEO of Royal Bafokeng Platinum had sold some of his shares to the company, as well as the CFO, I believe it would seem that the Royal Bafokeng house has taken a position on whom they want their suitor to be. Would you say that this is the case, and what kind of interactions have you had – and are you having – with Royal Bafokeng Platinum?

JOHAN THERON: Look, we’ve been in conversation with them for the better part of two years. Obviously we were a lot closer over the last eight to 10 months when we did a due diligence on each other. But I would say that they’ve remained open to counter-bids. They’ve handled us very professionally and I think they are only looking for the best interests of their shareholders. To the extent that Northam comes with a better offer that would certainly be welcomed by them.

FIFI PETERS: And what about the PIC, the Public Investment Corporation, because quite a number of the analysts we are speaking with are saying that they could possibly be the kingmaker in this deal. What have your conversations with the PIC been and what’s their feeling on the deal?

JOHAN THERON: Look, obviously they are our biggest shareholders, so we have been close to them and keep them in the know. I think they’ve got two considerations.

One is they need to follow due process and they need to ensure that they deliver value for their own clients. Secondly, they’ve got a broader South African economy hat on, so to speak, so they are very open to understanding how deals like this influence the landscape from job security, regional economy, taxes, security – all of those good things. I’m sure they will factor that into their decision-making.

FIFI PETERS: Just going back to the price, the mandatory offer to the rest of the market, now you’ve reached that level – that would be an offer at R150/share.

JOHAN THERON: It’s a little more complex than that. It’s structured as R90 cash and 0.3% of an Impala share for every RBPlat share. For instance, at the closing price today – I think we closed at around R214/share – if you factor that in, the offer is around R154/share. So the offer price does shift up and down depending on the Impala price, because some of the consideration is our equity.

FIFI PETERS: If tomorrow Northam perhaps says that it’s also in a position to make this mandatory offer, as it seems was indicated by Royal Bafokeng in its previous statement, what happens then?

JOHAN THERON: Well, we would have to see to what extent that offer manifests the offer consideration, and then we will have to take a view. So we clearly have the option in this process to up our consideration if we deem that necessary, but we were quite clear at the outset that it was never our intention to get into a bidding war and we certainly don’t want to fight to the death for control here. We are honestly looking for the best possible outcome for all parties. Most of the regional synergies sit on our side of the fence and we would be quite keen to unlock that to the benefit of everybody concerned here.

So we would certainly have to take a view on that, but there’s no intention here to get into a bidding war with Northam.

FIFI PETERS: All right. Isn’t it a bit too late, Johan?

JOHAN THERON: Well, these things move in particular ways and they change almost on a day-to-day basis, and that’s why the likes of you [Moneyweb] have been so enthralled with it. It’s almost like every day you take it from there. It was never our intention for it to become as noisy or complicated as certainly it sounds right now. But hopefully from this point forward we can move in a common direction, and get to a point where we can really unlock some of these values.

FIFI PETERS: I tell you, we’re watching this screen now with popcorn in hand [laughing] looking at how this thing ends.

Johan, thanks so much for availing yourself to us today. Johan Theron is the spokesperson at Impala Platinum.