Harmony / ARMgold - Proposed merger between Harmony and ARMgold Release Date: 02/05/2003 17:37:02 Code(s): HAR AOD
Harmony / ARMgold - Proposed merger between Harmony and ARMgold
Harmony Gold Mining Company Limited African Rainbow Minerals Gold Limited
(Incorporated in the Republic of (Incorporated in the Republic of
South Africa) South Africa)
(Registration number 1950/038232/06) (Registration number 1997/015869/06)
Share code: HAR Share code: AOD
ISIN: ZAE000015228 ISIN: ZAE000039244
Proposed merger between Harmony and ARMgold
JPMorgan and Rand Merchant Bank are authorised to announce that Harmony and
ARMgold have reached agreement, in terms of a memorandum of understanding,
regarding their proposed merger ("the merger"). It is intended that the merger
will be implemented by means of a Scheme of Arrangement (the "scheme") to be
proposed by Harmony, between ARMgold and its shareholders, in terms of Section
311 of the Companies Act, 1973 (Act 61 of 1973), as amended, and will be subject
to the fulfilment of the conditions precedent reflected in paragraph 7 below
("the conditions precedent").
2. Background and rationale for the merger
In April 2002, Harmony and ARMgold formed a joint venture that acquired the
Freegold assets from AngloGold Limited. At the same time, Harmony and ARMgold
entered into a co-operation agreement for a period of 12 months, to jointly
exploit opportunities for the acquisition and establishment of gold mining and
related businesses and the acquisition or exploitation of mineral rights within
South Africa. Since that time Harmony and ARMgold have worked together pursuing
various opportunities including the acquisition of St Helena. The companies also
have complementary management cultures and strategies.
The merged company will trade under the name Harmony, with conspicuous and
distinctive emphasis on the letters "ARM" to include ARMgold"s identity in the
merged company. Harmony will be the fifth largest gold producer in the world and
the largest unhedged South African gold producer. Harmony will also be truly
representative of the new South Africa with Historically Disadvantaged South
Africans holding in excess of 26% of its issued ordinary share capital.
Harmony will own operating mines in all the major gold producing regions of
South Africa. It is also expected to realise synergies in the Free State in the
short term, by consolidating the region into one operating unit thereby
optimising the use of infrastructure and exploitation of the orebodies, which
should deliver enhanced returns for shareholders.
3. Chairman and CEO
Mr Patrice Motsepe will become the non-executive chairman of the merged company
and will play an active and extensive role in advancing the long term interests
of the company. Mr Bernard Swanepoel will remain the chief executive.
4. Consideration payable in terms of the merger
Subject to the fulfilment of the conditions precedent, Harmony will issue 63,67
million ordinary shares in Harmony ("Harmony shares") in consideration for the
merger. The merger ratio will therefore be two Harmony shares for every three
ordinary shares held in ARMgold ("ARMgold shares"). The ratio of Harmony shares
to ARMgold shares was calculated with reference to the 30 day volume weighted
average traded ordinary share prices of Harmony and ARMgold shares prior to the
final negotiation of the terms of the merger.
ARMgold will pay a special dividend of 500 cents per ARMgold share prior to the
implementation of the merger. Harmony undertakes not to pay any dividend prior
to the implementation of the merger.
Based on the closing price per Harmony share on Wednesday, 30 April 2003 of
R77.00, the proposed effective consideration, including the special dividend,
values each ARMgold share at R56.33 per share.
The aggregate number of Harmony shares to be issued in terms of the merger is
expected to represent approximately 26% of the enlarged issued share capital of
the merged company. The Harmony shares to be issued will rank pari passu in all
respects with the existing ordinary shares in Harmony.
5. Financial effects of the merger to Harmony and ARMgold
Based on the assumptions set out below, the financial effects of the merger per
Harmony and ARMgold share for the six months ended 31 December 2002 would have
been as follows:
Per Harmony share:
Rand per share Notes Before After Inc/(Decr)
Earnings per Harmony 1 5.09 5.76 13.3%
Headline Earnings per 1 5.00 5.67 13.5%
Net Tangible Asset Value 2 45.03 39.91 (11.4%)
per Harmony share
Per ARMgold share:
Rand per share Notes Before After Inc/(Decr)
Earnings per ARMgold 1 5.23 4.00 (23.5%)
Headline Earnings per 1 5.16 3.94 (23.7%)
Net Tangible Asset Value 2 22.24 31.61 42.1%
per ARMgold share
1. Earnings per share and Headline Earnings per share are calculated using
historically published information for Harmony and ARMgold for the six months
ended 31 December 2002 as if the merger had taken place with effect from 1 July
2002 adjusted for the loss of interest received at 9.00% before tax on the
special dividend to be paid to ARMgold shareholders.
2. Net tangible asset value is calculated as if the merger (including the
payment of the special dividend of R5.00 per share) had occurred on 31 December
2002. There are no material intangibles assets.
6. Shareholdings in Harmony and ARMgold
Shareholders representing 55.6% of the issued share capital of ARMgold will be
giving irrevocable undertakings to vote in favour of the scheme in respect of
the ARMgold shares held by them. African Rainbow Minerals Investment and
Exploration (Pty) Limited, which will hold approximately 14% of the merged
company, will be agreeing to a lockup agreement in respect of its shareholding
for a period of six months after the merger.
7. Conditions precedent
The implementation of the scheme is conditional, inter alia, upon:
the required majority of votes being cast in favour of the scheme at the scheme
meeting convened for such purpose;
- the passing of any requisite resolutions by the shareholders of Harmony in
general meeting, to enable Harmony to propose and implement the scheme;
- the High Court of South Africa (Witwatersrand Local Division) sanctioning the
scheme and the Order of Court sanctioning the Scheme being registered by the
Registrar of Companies; and
- the prerequisite rulings and approvals of the relevant regulatory authorities,
including the Competition Authorities.
8. Alternative offer structure
If the scheme fails for any reason, Harmony will make a general offer (the
"offer") to ARMgold shareholders in terms of the rules of the Securities
Regulation Panel ("SRP"). The consideration payable under the offer will remain
- the same as that paid under the scheme and the offer will be subject to the
same conditions precedent reflected herein, but excluding the conditions
precedent that are specifically applicable to the scheme. In addition, the offer
may be conditional on achieving a 90% acceptance level, which may be reduced or
waived by Harmony at its sole and absolute discretion.
Upon implementation of the merger, Harmony will own the entire issued share
capital of ARMgold and application will be made to the JSE Securities Exchange
South Africa ("JSE") for the termination of the listing of ARMgold.
10. Documentation and announcements
Documentation, which is subject to the approval of the SRP and the JSE will be
despatched to shareholders of ARMgold and Harmony as soon as possible. A further
announcement giving the salient dates of the scheme will be published shortly.
The board of directors of ARMgold will seek appropriate external advice as to
how the offer affects the minority shareholders and the substance of such advice
will be made known to shareholders by means of an announcement that will be made
in due course.
2 May 2003 2 May 2003
Financial adviser to Harmony Merchant Bank and Transactional
sponsor to ARMgold
JPMorgan Chase Bank Rand Merchant Bank (a division of
(Registration number FirstRand Bank Limited)
2001/016069/10) (Registration number:
Sponsor to Harmony Legal Advisor to ARMgold
J.P. Morgan Equities Bowman Gilfillan Inc
(Registration number (Registration number
Legal Adviser to Harmony Sponsor to ARMgold
Cliff Dekker Inc ?Nedbank Corporate?
Reporting Accountants and
Auditors to Harmony and