their opinion:
AngloGold Announces Superior Offer For Normandy
Date: Thursday, November 29, 2001
AngloGold today announced an increase in its takeover offer for Normandy Mining , adding a cash payment of 20 Australian cents per Normandy share to its original offer of 2.15 AngloGold shares per 100 Normandy shares.
AngloGold’s revised offer values Normandy at A$1.65 per share based on AngloGold’s closing share price on 28 November 2001 on the New York Stock Exchange (NYSE). Newmont’s offer is A$1.45 per share (with a possible additional 5 cents per share, payable in the event of a 90% acceptance of the offer), based on Newmont’s closing share price on the NYSE on the same date. Based on the weighted average share prices of AngloGold and Newmont since the announcement of the Newmont offer on 14 November 2001 and the relevant US$:A$ exchange rates over this period, AngloGold’s revised offer is equivalent to A$1.66 per share, compared with the Newmont offer of A$1.46 per Normandy share (with a possible additional 5 cents per share, payable in the event of a 90% acceptance of the offer).
Offer is free of defeating conditions AngloGold has also declared its offer free of all defeating conditions including the minimum acceptance condition.
The increase in the offer is subject only to the approval of AngloGold shareholders in accordance with Johannesburg Securities Exchange (JSE) requirements, which is expected to be received at a shareholders’ meeting on 19 December 2001. This granting of approval is expected to be forthcoming, given that AngloGold’s 53% shareholder, Anglo American plc, has provided an unqualified commitment to vote in favour of the relevant resolution.
AngloGold will also accelerate the payment terms from 30 days to five business days. For acceptances received by close of business on 17 December 2001 AngloGold intends to provide the relevant consideration on 20 December 2001. For acceptances received after 17 December 2001 AngloGold intends to provide the relevant consideration within five business days of receipt of acceptance. The closing date for the revised AngloGold offer is 27 December 2001.
Offer is superior to Newmont’s proposal AngloGold believes that its revised offer is far superior to Newmont’s offer for the following reasons:
Premium: AngloGold’s revised offer represents a 10% premium to the Newmont offer based on the closing share prices of both companies on the NYSE on 28 November 2001 and a 10% premium based on both companies share prices in the period from the announcement of Newmont’s offer on 14 November 2001 to 28 November 2001.
Cash Consideration: AngloGold’s offer incorporates a significant cash payment of 20 Australian cents per Normandy share. This compares with Newmont’s cash payment of 5 Australian cents per Normandy share which is conditional on receiving a 90% acceptance of its offer.
Certainty: AngloGold’s offer is open, free from defeating conditions and capable of immediate acceptance. This compares with Newmont’s highly conditional and complex offer. Normandy shareholders have certainty today with AngloGold’s offer.
Accelerated Payment: Under AngloGold’s revised offer, payment will be provided within five business days of receipt of acceptances, with first payments commencing on 20 December 2001, compared with payment only in late February 2002 under the Newmont offer.
Fair and Reasonable: AngloGold’s revised offer is fair and reasonable and within the range at which the independent expert’s report in the Normandy response statement valued Normandy shares.
Performance: AngloGold is financially superior to Newmont, as has been demonstrated by its higher earnings and lower production costs.
Dividend: AngloGold has a track record of a high dividend yield. AngloGold’s final dividend for the year ended 31 December 2001 will be declared early in 2002. Normandy shareholders who accept AngloGold’s revised offer and are on the register on the record date, will qualify to receive this dividend. Acceptance of Newmont’s offer could result in a substantial reduction in dividends for Normandy shareholders.
Re-rating potential: AngloGold shares currently trade at significantly lower multiples than North American companies of similar size. AngloGold believes that there is significant upside potential from a re-rating of its share price.
Rationale for the Increased Offer
AngloGold’s decision to increase its offer comes after a careful review of its current offer in the light of the Normandy response statement, including the detailed independent expert’s report (incorporating a 116 page technical review by Australian Mining Consultants) which values Normandy at A$1.48 to A$1.88 per share, and information published by Normandy in its annual report for the year ended 30 June 2001 and in its results for the September quarter 2001. These reports were published following the announcement of AngloGold’s initial offer. Whilst AngloGold does not agree with all the assumptions made, or the values derived, in the independent expert’s report, the company considers that its increased offer is fully supported by the underlying value of Normandy’s assets and the synergies which will be realisable from a combination of the management and assets of Normandy and AngloGold.
AngloGold has identified a number of sources of additional value:
AngloGold has reassessed the after tax synergies which should be able to be realised and has increased its estimate from US$25 million per annum to US$40 million per annum. AngloGold’s revised estimate includes the cost savings that are likely to be achieved from increased scale in Australia through purchasing and procurement and leveraging regional and global services between operations which are in close proximity to AngloGold’s existing operations.
Recent changes to South African tax legislation regarding controlled foreign entities have enabled AngloGold to reduce its effective tax rate in Australia.
Normandy has recently announced extremely encouraging exploration results from the Favona deposit at Martha Hill in New Zealand. The Favona system is likely to lead to a significant underground mining operation, which will extend the mine life of the Martha Hill operations.
Australian Mining Consultants has identified upside potential at Normandy’s Tanami operations. In particular, Australian Mining Consultants has identified significant underground potential at Callie below the current cut-off depth for reserves and the likelihood for further open-pit discoveries.
Australian Mining Consultants has provided significant information on Golden Grove and confirmed that the recent exploration results are likely to extend the mine life significantly. The valuation of Golden Grove is substantially more optimistic than AngloGold’s previous assessment.
Normandy has recently announced some encouraging exploration results from the Martabe prospect in Indonesia.
Normandy continues to announce encouraging results from the Yamfo-Sefwi/Ntotoroso area in Ghana and optimisation studies are continuing. All government approvals to develop the project are in place.
Normandy has assumed responsibility for mining and gold recovery at Midas. This step, combined with a new mining fleet and workforce, should lead to improved maintenance practices and operating efficiencies. This value was previously discounted until some evidence of improvement could be shown. The 17% increase in gold production recently announced for the September quarter has led AngloGold to increase its valuation of Midas.
The completion of the capital raising for Australian Magnesium Corporation Limited (AMC) has significantly reduced the risk of this investment. AngloGold had determined a downside potential exposure to Normandy in relation to the indemnities and guarantees provided by Normandy to AMC, which may have been triggered if the capital raising for AMC had not proceeded. Following the completion of the capital raising, AngloGold considers that the value of Normandy’s investment in AMC is reflected by the current market value of Normandy’s investment in AMC and the loans provided by Normandy to AMC.
Top-up Facility
AngloGold has decided to increase the maximum subscription under the top-up facility from A$5,000 to A$7,500. The top-up facility will enable Normandy shareholders to acquire additional AngloGold shares at a 7.5% discount to market prices. The top-up facility will remain subject to a maximum issue of 7.0 million AngloGold shares, or approximately 4.3% of AngloGold’s expanded issued capital following the acquisition of Normandy and the issue of the maximum number of shares under the top-up. The top-up facility has also been extended to shareholders in the United States. Other than these changes, the terms of the top-up facility will remain as set out in AngloGold’s bidder’s statement.
Shareholders who have already accepted the offer and have elected to utilise the top-up facility will be entitled to increase their subscription up to the revised maximum.
AngloGold believes that the top-up facility is highly attractive for retail investors and should promote further trading liquidity for AngloGold shares in Australia.
Bobby Godsell comments
Commenting on this announcement, AngloGold’s Chairman and CEO, Bobby Godsell, said: “I am confident that Normandy shareholders will find the revised AngloGold offer extremely attractive, both in terms of price and certainty. In addition, I believe that the real value in a transaction of this kind is more likely to be achieved in the longer term than it is to be found in the immediate benefits of any offer. In bringing together the operations of Normandy and AngloGold, which already have more in common than most other gold assets, there exists the chance to unlock real, lasting value creation for shareholders and sustainable benefits for all who may be associated with the combined companies.”
Timetable for the revised offer
Lodge revised bidder’s statements with ASIC & SEC 29 November
Lodge revised AngloGold circular with JSE 29 November
Revised bidder’s statement mailed to Normandy Shareholders 3 December
Revised AngloGold circular mailed to AngloGold Shareholders 4 December
AngloGold shareholders meeting 19 December
First payment to Normandy shareholders who Accept 20 December
Scheduled close of offer 27 December
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