JOHANNESBURG (miningweekly.com) – Shareholders on Thursday voted down the formal merging of the mining companies JCI and Randgold & Exploration (R&E) – but informal negotiations are poised to continue in order to reach a new settlement that has the potential to unlock R1-billion in liquid assets alone, at a time of liquidity coming in at a premium in today’s illiquid financial world.
Both JCI and R&E operated in the past under the leadership of the controversial, deceased mining magnate, Brett Kebble, and the merger hearings have been adjourned, reinstated and readjourned intermittently since January this year.
R&E CEO Marais Steyn told Mining Weekly Online that R& E and JCI owned R1-billion worth of Gold Fields shares between them.
“We’re sitting in a global environment where liquidity comes at a big premium and between Randgold & Exploration and JCI we have liquid assets in the form of Gold Fields shares worth a billion-rand.
“We can either distribute those liquid assets to shareholders, or pursue other opportunities. There’s quite a rosy future ahead and we’ll find an alternative.
“We’re very disappointed. Ninety-five per cent of our shareholders saw this as an olive branch being extended to JCI and its shareholders to resolve the overwhelming claims that Randgold & Exploration has against JCI,”
“But, we believe that a minority shareholder of JCI, whose specific interests were not looked after, managed to stop this merger from taking place. As has been indicated by agreements reached earlier by JCI and Investec. I think there is a commerciality and we want to finalise that for shareholders now,” Steyn said.
“It's very clear that between JCI, Investec and Randgold & Exploration there's a lot of understanding of the future and we understand where we have to take these companies to resolve the disputes.
“I can, however, not speak on behalf of Letšeng or Monty Koppel. These two parties will have to decide if they want to be part of the future, and we have to find solutions, which either include or exclude them. Obviously, including them would be far easier, but we cannot be held to ransom by a specific shareholder. We will not allow that.
“In terms of the merger ratio, 78% of the pool of assets goes to R&E and the remaining 22% to JCI. If you start with that, and take into account the liabilities in the companies, there are a substantial amount of liquid assets.
“In today’s terms, R1-billion is a lot of money. We have other exciting assets and claims against parties that have been party to the larger fraud that has taken place under the previous regime, which we will also pursue.
“There are interesting options ahead and the management of R&E will exploit the liquidity, which comes at a premium today, to the best benefit of the shareholders,” Steyn added.
Senior counsel Michael van der Nest, acting as chairperson for the second consecutive time in the absence of senior counsel Vincent Maleka, declared that the merger had not been agreed by the required majority of at least 75% in terms of Section 311 of the Companies Act.
Van der Nest said that he would report the failure of the merger to Johannesburg's South Gauteng High Court at 10:00 on Tuesday April 14.
But JCI CEO Peter Gray told Mining Weekly Online at the close of the meeting: “It’s not the end of the road. We’ll in all probability meet over the weekend, and, if not, then definitely as early as possible on Tuesday, when everyone is back, and plan the way forward.
“We have some alternatives, but I think it’s premature to detail what we’re going to do right now because I don’t want people interfering again from the side.
“The main players will be JCI and Randgold & Exploration. There is a log of goodwill within Investec and I am comfortable that we’ll come to satisfactory arrangements on what is in the interests of the shareholders and clearly there will have to be some discussion regarding the position of Letšeng,” Gray said.
UK barrister Denis Daly, acting for Letšeng and Koppel, told Mining Weekly Online that the unsuccessful merger proposal had taken place within the confines of South Africa’s Securities Regulation Panel (SRP) code, the SRP being the regulatory body, established in accordance with the Companies Act, to govern effective transactions.
“We’re now free to talk among all the parties, absent those limitations and strictures that were put upon parties by the SRP code. There’s no longer an effective transaction for the context of the talks and we believe that there is significant progress to be made," Daly said.
On the time span envisaged to reach a settlement, Daly said: “It’s likely to be shorter rather than longer, given the past talks we’ve had. I am not liberty to reveal the content of those talks, but I have no reason to suggest that the parties will start on any other basis than the one that’s currently being discussed. If that’s the case, there’s no reason why this should not be brought to a successful termination, to everybody’s satisfaction, in the very near term.”
On concerns over the protection of minority shareholders outside a regulatory environment, Daly told Mining Weekly Online: “There’s no aspect of minority protection that will be lost, other than the special focus that’s brought by the SRP on the parties who are engaged in the negotiations for an effective transaction.
“All of the common law statutory rights that apply to minorities, absent the code, will still apply, and any minority parties that feels prejudiced by what is being proposed, will have a full right to deploy their ordinary remedies in law.
“So, we are not moving from the highly regulated arena into the Wild West. We're just moving out of the very sharp spotlight of the regulatory provisions of the SRP,” Daly said.
The SRP was enjoined by law to look after minority shareholders and did so by application of the SRP code. “It’s been the application and respect for the code that has thrown out the challenges that have hamstrung this merger, although we felt that the risks were worth taking.
“I can’t ventilate the objections of individual parties, because those talks took place under a confidential protocol, but I can say that the application of the SRP code, as a general principle, requires all shareholders to be treated the same in an effective transaction.
“Any shareholder who seeks a different form of treatment requires the blessing of the panel. Getting the blessing of the panel is not necessarily the end of the road. It’s open to a disgruntled shareholder, during the merger process, saying he or she is not happy with the ruling, and then to attack the merger, and there are various consequences that flow from that, in the application of the code under the general rubric of the equal treatment of shareholders,” Daly said.
Koppel told Mining Weekly Online that he believed all the parties concerned would have a meeting to decide on the course to take.
“We’ve had many discussions, but due to the regulations of the SRP, we couldn’t do all the things that we wished to do by virtue of the regulations, which are only binding when two companies are endeavouring to merge or when one takes over another.
“Investec have got shares in the company, which makes them subject to various rules, and the same with Letšeng, JCI and Randgold & Exploration. We should now be able to achieve more or les what we would have achieved had we carried on with the merger,” Koppel added.
Investec’s Kevin Kerr told the hearing that the delays had been caused by allowing Letšeng to negotiate a settlement with Investec, relating to the payment of a fee to Letšeng itself, which was the issue that made it “very difficult” to conclude the hearing.
Daly interjected, but Van der Nest ruled his interjection as being improper. Daly continued, however, accusing Kerr of coming “very close” to breaching a “without prejudice protocol”.
Daly said at previous hearings that agreement would have "overwhelming commercial benefits for all participants".
Daly last month won an adjournment on the basis of seeking a resolution of the dispute between Letšeng, JCI and Investec that could benefit shareholders by R100-million "and possibly more than that".