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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                        
("Harmony")                           ("ARMgold")                               
Proposed merger between Harmony and ARMgold                                     
1.   Introduction                                                               
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%                     
share                                                                      
     Headline Earnings per     1      5.00     5.67   13.5%                     
     Harmony share                                                              
     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%)            
share                                                                      
     Headline Earnings per     1        5.16     3.94        (23.7%)            
     ARMgold share                                                              
     Net Tangible Asset Value  2        22.24    31.61       42.1%              
per ARMgold share                                                          
Notes:                                                                          
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.                          
9.   Listing                                                                    
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.                                                                  
     Virginia               Sandton                                             
     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:                           
1966/010753/06)                                 
Sponsor to Harmony              Legal Advisor to ARMgold                        
J.P. Morgan Equities            Bowman Gilfillan Inc                            
(Registration number            (Registration number                            
1995/011815/06)                 1998/021409/21)                                 
Legal Adviser to Harmony        Sponsor to ARMgold                              
Cliff Dekker Inc                ?Nedbank  Corporate?                            
(Registration number                                                            
1998/018173/21)                                                                 
Reporting Accountants and                                                       
Auditors to Harmony and                                                         
ARMgold                                                                         
PricewaterhouseCoopers Inc.                                                     
Registration number                                                             
1998/012055/21                                                                  



                                        
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