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The possible takeover bid for Northam Platinum by an unnamed bigger rival has prompted the group to invite anyone who’s interested to make their own offer, a process that could prompt the market to reasses its valuation of Northam. The company said this week it had received an unsolicited “exploratory non-binding” approach from a major local producer, in the form of either an “asset-level transaction”, which implies one or more mines could change hands, or a “corporate transaction”, which would be a full takeover.Impala Platinum (Implats) and Sibanye-Stillwater both denied having made the approach, leaving the market to speculate that the suitor is Valterra Platinum, which has a healthy balance sheet. The company has not responded to media queries.Northam, chaired by former deputy finance minister Mcebisi Jonas, said it would now welcome proposals from other parties and set a deadline of December 1 for expressions of interest. More detailed discussions would be held in the new year. “The main objective of this process is to ensure Northam’s long-term value and position in the industry are appropriately recognised and crystalised for the benefit of the company, its shareholders and other stakeholders,” Northam CEO Paul Dunne said at the group’s annual financial presentation on Friday. He said such processes were common practice, citing Anglo American’s plan to sell diamond giant De Beers. “It is a process, it is quite common, you have the De Beers process. We have received an approach from a third party and we will run a process against that approach,” he said.We have received an approach from a third party and we will run a process against that approach— CEO Paul DunneNortham is executing a “Vision 2031″programme that sets annual sales targets of 1.5Moz for PGMs and more than 2Mt for chrome. Northam is on a strong financial footing after glowing results for the year ended June. The group posted record metal production and sales figures and an operating profit of R14.2bn. It will deliver a R17 per share dividend to shareholders for the period. The last major merger & acquisition activity in the platinum industry was the fierce tussle for Royal Bafokeng Platinum between Northam and Implats. Implats emerged victorious, acquiring RBPlat for about R10bn in 2023.Dunne said that in mining, achieving goals quickly was critical. “The most valuable thing is time, and we have a proven track record of rapidly growing our production base to create the company we are today,” he said.Zimele Mbanjwa, investment analyst at FNB Wealth & Investments, said Northam made an attractive takeover target. “It is one of the strongest independent producers with meaningful scale, long-life assets, established processing infrastructure, a growing chrome business and a visible production growth pipeline.”Founded in 1977, Northam now produces 1Moz a year in PGMs from operations at Zondereinde in Limpopo, Booysendal on the Limpopo-Mpumalanga border, and Eland ini North West. Mbanjwa said Valterra was probably the unnamed suitor, given that it had by far the strongest balance sheet in the sector.Among the motives for Valterra would be the proximity of its Amandebult mine to Zondereinde, which would offer significant operational synergies and save on fixed costs and capex. He said Valterra’s smelters and refineries would benefit from the added scale. Mbanjwa said the sector had struggled over the years due to depressed PGM prices. Producers had cut greenfield expenditure and sought instead to unlock value and efficiencies via synergies and brownfield investments. He did not foresee opposition from competition authorities. “Based on market share alone, antitrust approval would be likely, given that the combined entity, at a global scale, wouldn’t pose monopolistic risk. However, it’s hard to tell if added capacity at the combined entity’s processing facilities would disadvantage smaller players who depend on the smelting and refining networks of the bigger players.“ Mbanjwa said the public interest and employment aspects would also be looked at. Mish-al Emeran, portfolio manager at Abax Investments, said few details were available about the proposed Northam transaction, but “Northam has seemingly chosen to run a competitive process to test whether there is broader strategic interest”. He said from an investment perspective, the process could help to surface the strategic value of Northam’s long-term PGM asset base, processing infrastructure and growth pipeline in a sector where primary supply was constrained. “For now, the most important development is that the Northam board is effectively testing the market to determine whether third parties are prepared to ascribe a higher value to the business than the public market currently does.”Business Times
