Harmony extends Gold Fields bid

Harmony Gold Mining (HMY-N) has extended its takeover offer for Gold Fields (GFI-N) until May 20. Still, Harmony CEO Bernard Swanepoel said that his company would not pursue the merger at any cost.

"We are currently building five growth projects in South Africa and have exciting projects that will be developed in Papua New Guinea. We don’t need Gold Fields," he said in a prepared statement. "We will not pursue this merger if it is not justifiable at the right price and on the right terms.”

Swanepoel said the extension was in response to the bid being delayed at the Competition Tribunal, which recently said it would hold hearings over Harmony’s bid from May 3 to May 6. The hearings are later than expected to allow for preliminary hearings, and to provide the opposing parties time to exchange documents, said the Tribunal.

The Tribunal must hand down its decision within 10 business days of the hearings; Harmony’s offer would then need to remain open for at least 21 days. Harmony’s bid was set to expire on March 18.

The new deadline for the offer, which stands at 1.275 Harmony shares for each gold Fields share, coincides with the expiration date of Harmony’s irrevocable support agreement with Russian-based backer Norilsk Nickel. Norilsk has pledged its 20% stake in Gold Fields to Harmony’s offer; Harmony hopes to extend the agreement.

Swanepoel called the current ratio between the two company’s share prices "crazy," and said that any decisions about the offer would be based on the best interests of Harmony and its shareholders.

The offer’s exchange ratio implies a value of US$11.31 for each Gold Field share, based on each company’s closing price in New York on Mar. 9; Gold Fields shares closed at US$12.71 that day. Both issues were lower in afternoon trading following the extension announcement on Mar. 10.

Late last year, Harmony acquired around 11.5% of Gold Fields’ shares under the early-settlement portion of its takeover bid. So far, less than 1%, of Gold Fields shares have been tendered to the follow-on offer. The company says the acceptance level is owing to outstanding approval from the competition authorities.

In other news, Swanepoel warned that due to the Christmas holiday, the current reporting period was traditionally slow, and that the company was currently testing its balance sheet for any impairment charges that might crop up thanks to the stronger rand. Any impairment charges would be reported at the end of the March quarter.

Harmony also reported that its audited proven and probable reserves amounted to 52.1 million ounces, down about 16% from the end of the company’s fiscal year in June 2004.