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AngloGold/Ashanti - Proposed Merger Of Anglogold Limited And Ashanti Goldfields
Company Limited - News Release
ANGLOGOLD LIMITED
(Registration number 1944/017354/06)
(Incorporated in the Republic of South Africa)
ISIN : ZAE000043485
JSE Share Code : ANG
("AngloGold")
ASHANTI GOLDFIELDS COMPANY LIMITED
(Registration number 7094, ARBN 074370862)
(Incorporated in Ghana)
ISIN : GH0000000029
GSE Share Code : AGC
("Ashanti")
This announcement does not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale or distribution of securities in any
jurisdiction in which such offer, sale or distribution is not permitted
SUMMARY
5 August 2003
PROPOSED MERGER OF ANGLOGOLD LIMITED AND ASHANTI GOLDFIELDS COMPANY LIMITED -
NEWS RELEASE
Strategic combination will create growth focused, leading global gold
producer with largest reserves in the gold industry
Further to the announcements made by AngloGold and Ashanti on 16 May 2003 and
13 June 2003, the boards of directors of AngloGold and Ashanti are pleased to
announce today that they have agreed the terms of a recommended merger of the
two companies (the "Merger"). AngloGold and Ashanti have therefore entered into
a transaction agreement ("Transaction Agreement") to implement the Merger.
Lonmin Plc, which owns 27.6% of Ashanti"s issued ordinary share capital, has
agreed to support the Merger. The combined group will be known as AngloGold
Ashanti Limited and will trade as Ashanti AngloGold in Ghana.
Commenting on the Merger today, Bobby Godsell, Chief Executive Officer of
AngloGold, said:
"This combination will create a growth focused, leading global gold producer,
with the largest reserve base in the industry. Ashanti brings to AngloGold a
portfolio of complementary top-tier, low-cost and long-life gold mines, as well
as attractive exploration opportunities in one of the key gold producing regions
of the world. We can work effectively together, using AngloGold"s existing
financial and technical resources, to maximise the upside potential of this
combination, particularly in relation to the deep level underground development
of the Obuasi mine. We are pleased that the Government of Ghana has appointed a
consortium of advisers, led by Societe Generale, to assist the Government in its
consideration of the proposed Merger and would hope to have clarity on the views
of the Government by mid-September."
Sam Jonah, Chief Executive of Ashanti, said:
"AngloGold and Ashanti are synonymous with excellence in gold mining. The
combined strength of the new group will unleash a new African giant on the gold
mining industry. The immense technical and financial strengths of the new group
will enable the realisation of the full potential of the Obuasi mine in the
shortest possible time frame."
Rationale for the Merger
The combined group will have the following attributes:
* Growth/Upside potential - an enhanced production profile is expected from
existing brownfields opportunities and a strong exploration and land holding
portfolio
- AngloGold"s proven ability in the development of deep level projects will
maximise the opportunity for the development of deep level underground mining at
Obuasi ("Obuasi Deeps"), where a scoping study has been undertaken to review the
mine"s potential down to 100 Level as well as alternative production rates,
infrastructure options and operating and capital cost projections
- A dedicated project team will undertake a feasibility study regarding
Obuasi Deeps with anticipated exploration expenditure of US$44 million over the
next five years. Including this amount, the total capital expenditure for Obuasi
Deeps is estimated to be US$570 million in real terms over the expected life of
mine
- The combined group also intends to invest an additional US$110 million in
real terms over the next five years on underground equipment, infrastructure,
environmental and planning systems for the existing Obuasi mine. This amount is
in addition to capital expenditure already planned by Ashanti. AngloGold
management anticipates that these initiatives will improve underground working
conditions and mine planning, thereby increasing efficiencies with the objective
of reducing anticipated cash operating costs at Obuasi by US$20 per ounce in
real terms over the next five years
- The combined group intends to accelerate exploration programmes,
particularly at Obuasi
- The combined group will have extensive land positions in some of the most
prospective regions in the world
* Synergies - the combination will generate tangible synergy benefits with
approximately US$15 million per annum, before transaction expenses, expected
from the first full year after completion of the Merger
- Reduced financing costs
- Reduced administrative and procurement costs
- Consolidation of Geita ownership
- Breadth of technical capabilities to ensure the optimal development of
organic growth opportunities
* Scale - the combined group will have the production base, ore reserves and
financial resources to generate future value
- #1 in reserves - 93.2 million ounces of attributable proven and probable
reserves as at the end of 2002 (adjusted for the sale of Amapari and Jerritt
Canyon), a 31% increase in AngloGold"s current reserve base
- Production - re-enforces AngloGold"s position as one of the world"s largest
gold producers with 2002 pro forma attributable gold production of 7.3 million
ounces (adjusted for the sale of Jerritt Canyon), a 27% increase on AngloGold"s
attributable production level
- US$1.0 billion EBITDA (earnings before interest, tax, depreciation,
amortisation and before unrealised non-hedge derivatives) on a 2002 pro forma
basis (International Financial Reporting Standards)
* Operating strength - the combined group will have a portfolio of long-life,
low-cost assets and different ore body types in the key gold producing regions
- Cash operating costs - pro forma cash operating costs (including royalties)
of US$220 per ounce based on unaudited results for the six months to 30 June
2003
- Long-life assets - six operations in five countries with combined reserves
of 45.1 million ounces have current life of mine plans of 15 years or longer
- Diversification - well diversified asset portfolio comprising a balance of
open-pit and underground production from a total of 24 operations distributed
across 11 countries in the principal gold producing regions of the world
* Investment appeal - the combined group will have the growth potential, size,
liquidity and dividend yield to enhance appeal to the investment community
- Increased size - pro forma market capitalisation of approximately US$8.3
billion (based on AngloGold"s closing price on 1 August 2003, the last
practicable trading day prior to this announcement, and the issued ordinary
share capital of each company), meriting greater attention from major global
generalist and specialist investment institutions
- Share trading liquidity - increased liquidity, particularly in North
America, which represents some two thirds of AngloGold and Ashanti"s combined
share turnover
The Merger is expected to be accretive to headline earnings per share before
unrealised non-hedge derivatives for holders of AngloGold ordinary shares
("AngloGold Shares") and AngloGold American Depositary Shares ("AngloGold ADSs")
(together, the "AngloGold Shareholders") from completion of the Merger. It is
also expected to be accretive to cash flow per share from three years after
completion of the Merger following the expenditure of a significant proportion
of the proposed additional capital investment, at the existing Obuasi mine in
particular, as well as the redemption on completion of the US$75 million
Mandatorily Exchangeable Notes held by Lonmin Plc and the payment of transaction
expenses in the first year following completion of the Merger.
Terms of the Merger
The Merger will be effected by means of a scheme of arrangement (the
"Scheme") between Ashanti and its shareholders under the Ghana Companies Code
and take account of the required disclosure provisions of the Ghana Stock
Exchange. Under the terms of the Merger:
* Each holder of an Ashanti ordinary share ("Ashanti Share") and each holder of
an Ashanti Global Depositary Security ("Ashanti GDS") (together the "Ashanti
Shareholders") will be entitled to elect to receive either:
- 0.26 AngloGold Shares; or
- 0.26 AngloGold ADSs
for each Ashanti Share or Ashanti GDS ("Exchange Ratio")
Ashanti Shareholders resident in Ghana will have the option of receiving
AngloGold Ghanaian Depositary Shares ("AngloGold GhDSs"), 100 of which will
represent one AngloGold Share
* Based on the closing market price of AngloGold ADSs on the New York Stock
Exchange on 1 August 2003, the last practicable trading day prior to this
announcement, of US$32.15, the Merger values each Ashanti Share (and each
Ashanti GDS) at US$8.36 and amounts to aggregate consideration for Ashanti"s
issued ordinary shares of US$1,089 million
* This represents a premium of approximately 4% to the closing market price of
Ashanti GDSs on the New York Stock Exchange on 1 August 2003, the last
practicable trading day prior to this announcement, of US$8.00 and, on the basis
of closing prices for AngloGold ADSs and Ashanti GDSs on the New York Stock
Exchange on 15 May 2003, the day prior to the announcements of discussions, of
US$30.63 and US$7.10 respectively, a premium of 12%. Based on the average
closing prices of Ashanti GDSs and AngloGold ADSs on the New York Stock Exchange
over the 30 trading days up to and including 15 May 2003 these terms represent a
premium of 34%
* On completion of the Merger and based on the issued ordinary share capital of
each company, existing AngloGold Shareholders will own approximately 87% and
existing Ashanti Shareholders will own approximately 13% of the combined group
* Following completion of the Merger, Russell Edey, currently Chairman of
AngloGold will be Chairman of the combined group. Sam Jonah, in addition to
joining the Board, will play a leading role in the executive management of the
enlarged company in the position of President. His 34 years in the gold mining
industry in both an operating and a leadership capacity, position him well to
help guide the further development of the new company and the industry
particularly in Africa. In this new position, Mr. Jonah will share
responsibility with the CEO Bobby Godsell for strategy formulation, the
identification and development of new business opportunities and managing the
company"s relationships with governments, shareholders and other stakeholders.
In the enlarged company, Sam will join a five person Executive Committee,
chaired by Bobby Godsell. In addition, two other Ghanaian directors, to be
nominated by Ashanti, will become non-executive directors of the combined group
* AngloGold has received an undertaking from Ashanti"s largest shareholder,
Lonmin Plc, holder of 27.6% of Ashanti"s issued ordinary share capital, to vote
in favour of and support the Merger
* Ashanti"s head office in Accra, Ghana, will enjoy an expanded role within the
combined group"s operations
* The board of AngloGold has agreed to recommend a change of name of the
combined group to AngloGold Ashanti Limited and AngloGold has agreed to convene
an extraordinary general meeting to present a special resolution to this effect.
Anglo American plc, which currently owns 51.4% of AngloGold, has confirmed that
it will vote in favour of such resolution
* Following completion of the Merger, the combined group will be listed on the
JSE Securities Exchange South Africa, the New York Stock Exchange, the London
Stock Exchange, the Australian Stock Exchange and Euronext Paris and quoted on
Euronext Brussels. Application will be made to list shares and Ghanaian
depositary shares of the combined group on the Ghana Stock Exchange where the
combined group will trade as Ashanti AngloGold
* CIBC World Markets plc, Ashanti"s financial adviser, has delivered to the
board of directors of Ashanti its written opinion that the Exchange Ratio is
fair to the Ashanti Shareholders from a financial point of view
* The board of directors of Ashanti has approved the Merger and will recommend
that all holders of Ashanti Shares and Ashanti GDSs vote in favour of the
resolutions to be proposed to implement the Merger
* The Government of Ghana, holder of 16.9% of Ashanti"s issued ordinary share
capital, is currently considering the terms of the transaction and has appointed
a consortium of advisers, led by Societe Generale, in order to assist it in this
process. The Merger is conditional on receiving undertakings by the Government
of Ghana to vote in favour of and support the Merger and is also subject to
receiving certain regulatory and other approvals and undertakings, that have
been requested by AngloGold and Ashanti from the Government of Ghana. The
Transaction Agreement will terminate if these conditions are not satisfied (or
waived by AngloGold) on, or before, 30 September 2003 or such later date as may
be agreed by Ashanti and AngloGold. In addition, completion of the Merger is
conditional on, amongst other things, the approval of the Merger by Ashanti
Shareholders, receipt of other regulatory approvals (in addition to the
approvals from the Government of Ghana referred to above), third party consents
and the confirmation of the Scheme by the High Court of Ghana
* AngloGold and Ashanti hope to receive the views of the Government of Ghana in
relation to the Merger by mid-September. Further announcements, which will
include details regarding the timetable for the implementation of the Merger,
will be made in due course
Shareholders are reminded that there can be no assurance that the Merger will
be implemented. Consequently, holders of AngloGold and Ashanti securities are
advised to continue to exercise caution when dealing in relevant securities
until a further announcement is made.
This summary should be read in the context of the full announcement.
AngloGold"s JSE Sponsor : UBS
For further information contact:
AngloGold Ashanti
Steve Lenahan +2783 308 2200 Kweku Awotwi +233 21 77 2331
Peta Baldwin +27 11 637 6647 Corinne Gaisie +44 20 7256 9938
Charles Carter +1 212 750 7999
Tomasz Nadrowski +44 7958 749555
+1 917 912 4641
Andrea Maxey +61 8 9425 4604
UBS Investment Bank CIBC World Markets
James Hartop +44 20 7567 8000 Andy Quinn +44 20 7234 6000
First Africa
Kofi Adjepong-Boateng +27 11 327 3666
Citigate Sard Verbinnen Golin/Harris International
(US Media) (US investors and Media)
Paul Verbinnen +1 212 687 8080 Kevin Kirkeby +1 212 697 9191
Citigate Dewe Rogerson Grandfield
(UK Media) (UK investors and Media)
Patrick Donovan +44 20 7638 9571 Matthew Jervois +44 20 7417 4170
Channel TWO
(Ghanaian Media)
David Ampofo +233 21 666 643
CONFERENCE CALL DETAILS
An analysts" conference call will take place on 5 August 2003 at 13:00 Accra
time, 15:00 Johannesburg time, 14:00 London time, 09:00 New York time. The
conference ID number is 2138069.
The dial in numbers, by country, are:
North America +1 800 267 9155 or +1 706 634 0083,
United Kingdom +44 800 953 0406,
United Kingdom and Europe +44 1452 560 299,
Australia +61 800 766 788 or +61 28 228 7000,
South Africa +27 800 99 4050, and
Ghana +44 1452 560 299
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement are forward-looking within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, including without
limitation, those statements concerning (i) timing, fulfillment of conditions,
tax treatment and completion of the Merger, (ii) the value of the transaction
consideration, (iii) expectations regarding production and cost savings at the
combined group"s operations and its operating and financial performance and (iv)
synergies and other benefits anticipated from the Merger. Although AngloGold
and Ashanti believe that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations will
prove to have been correct.
For a discussion of important terms of the Merger and important factors and
risks involved in the companies" businesses, which could cause the combined
group"s actual operating and financial results to differ materially from such
forward-looking statements, refer to AngloGold"s and Ashanti"s filings with the
US Securities and Exchange Commission (the "SEC"), including AngloGold"s annual
report on Form 20-F for the year ended 31 December 2002, filed with the SEC on 7
April 2003 and Ashanti"s annual report on Form 20-F for the year ended 31
December 2002, filed with the SEC on 17 June 2003 and any other documents in
respect of the Merger that are furnished to the SEC by AngloGold or Ashanti
under cover of Form 6-K.
Neither AngloGold, Ashanti nor the combined group undertakes any obligation
to update publicly or release any revisions to publicly update any forward-
looking statements discussed in this announcement, whether as a result of new
information, future events or otherwise.
ADDITIONAL INFORMATION
In connection with the Merger, AngloGold will file with, or otherwise furnish
to, the SEC a scheme document/prospectus. Investors and security holders are
urged to carefully read the scheme document/prospectus regarding the Merger when
it becomes available, because it will contain important information. Investors
and security holders may obtain a free copy of the scheme document/prospectus
(when it is available) and other documents containing information about
AngloGold and Ashanti, without charge, at the SEC"s website at www.sec.gov.
Copies of the scheme document/prospectus together with any SEC filings that may
be incorporated by reference in the scheme document/prospectus may also be
obtained free of charge by directing a request to: AngloGold Limited, 11
Diagonal Street, Johannesburg 2001, PO Box 62117, Marshalltown 2107, South
Africa, Attention: Chris R. Bull, Company Secretary, telephone +27 11 637 6000,
fax: +27 11 637 6624.
UBS Investment Bank and First Africa Group Holdings (Pty) Limited ("First
Africa") are acting for AngloGold and no one else in connection with the Merger
and will not be responsible to anyone other than AngloGold for providing the
protections afforded to clients of UBS Investment Bank or First Africa or for
providing advice in relation to the Merger.
CIBC World Markets plc is acting for Ashanti and no one else in connection
with the Merger and will not be responsible to anyone other than Ashanti for
providing the protections afforded to clients of CIBC World Markets plc or for
providing advice in relation to the Merger.
Chester Crocker, Lynda Chalker and Edward Haslam, being Directors of Ashanti,
have not taken part in the deliberations of the board of directors of Ashanti
relating to the recommendation of the Merger. Chester Crocker and Lynda Chalker
did not participate because they or companies in which they have an interest
have entered into commercial contracts with AngloGold, its subsidiaries or its
major shareholder, Anglo American plc. Edward Haslam did not participate
because he is an executive director of Ashanti"s largest shareholder, Lonmin Plc
which has given an undertaking to AngloGold to support the Merger.
The statement that the Merger is expected to be accretive to headline
earnings per share before unrealised non-hedge derivative adjustments and, in
due course, cash flow per share for AngloGold Shareholders should not be
interpreted to mean that headline earnings per share before unrealised non-hedge
derivative adjustments or cash flow per share in the financial year in which the
Merger becomes effective or in any subsequent period, will necessarily be
greater than those for any relevant preceding financial period.
Date: 05/08/2003 07:57:02 PM Supplied by www.sharenet.co.za
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