The Johannesburg High Court on Thursday dismissed Gold Fields’ application to block Harmony Gold’s bid for the group, with the court dismissing Gold Fields’ argument that Harmony’s offer to Gold Fields’ shareholders was in contravention of South Africa’s Companies Act.
“The application is dismissed with costs which shall include the costs consequent upon the employment of three counsel,” Justice Lewis Goldblatt said in his judgement handed down on Thursday morning in a courtroom on the sixth floor of the Johannesburg High Court.
“We are thrilled, but the ruling was not unexpected. Bear in mind that the judge awarded costs to Gold Fields, which means that the judge feels that Gold Fields wasted his time,” Harmony marketing director Ferdi Dippenaar said.
“Gold Fields notes the decision by the High Court today The board of Gold Fields is and remains under a fiduciary duty to take necessary steps to protect its shareholders interests,” a Gold Fields spokesperson said.
“The fundamentals have not changed. Harmony’s hostile bid substantially undervalues Gold Fields. It offers overvalued Harmony paper, no cash and an insufficient premium. Gold Fields shareholders should protect their value and reject the offer from Harmony,” he added.
Gold Fields was seeking an order to have Harmony’s offer of shares to Gold Fields’ shareholders — which Gold Fields asserted was a document constituting a subscription in terms of the Companies Act — declared null and void.
Gold Fields was also seeking to gain an order against Harmony for the withdrawal of Harmony’s offer document to Gold Fields’ shareholders as well as other measures aimed at cancelling Harmony’s bid.
The basis for Gold Fields’ legal action was that Harmony’s settlement offer to Gold Fields shareholders, which is the exchange of 1,275 Harmony shares for every one Gold Fields share held, was unlawful and of no force and effect by the fact that the offer was not accompanied by a registered prospectus in terms of Section 145 of the Companies Act.
“It is crystal-clear now that following their defence presentation last week, the Gold Fields’ directors are unable to put forth a convincing value proposition to their own shareholders,” Harmony chief executive Bernard Swanepoel said in a statement on Thursday.
“We have shown that in comparison with Harmony, they run inefficient operations and they intend to sell their international operations to Iamgold on the cheap. Iamgold has published a net loss for the third quarter in a row. It is no wonder they are not focusing on the arguments, but on legal challenges and other delaying tactics,” Swanepoel said.
On Wednesday, Canadian gold miner Iamgold reported a loss for the group’s September quarter of $926Â 000, down from a profit of $4,587-million in the 2003 September quarter.
Gold Fields is attempting to merge its international mining assets with those of Iamgold. At the same time, Harmony Gold is seeking to dispose the proposed merger between the two, in order to merge with Gold Fields.
Goldblatt’s judgement centred on the definition of the word “subscription” found in Section 145, which he found to be only applicable to cash offers. Therefore, Section 145 didn’t govern Harmony’s share offer and therefore no prospectus was required.
Goldblatt sited the 1956 case of Governments Stock and Other Securities Investment Co Limited v Christopher in which the word “subscription” was found to have the meaning of “taking or agreeing to take shares for cash”.
“This has been accepted as the correct interpretation of the word in all the standard English and South African textbooks. However, a single judge in Australia has taken a contrary view and has held that ‘subscription’ includes subscribing in shares in consideration for other shares,” Goldblatt wrote in his judgement.
The Australia case in point was Broken Hill Proprietary Co Ltd v Bell Resources Ltd of 1984.
“In my view the meaning ascribed to the word ‘subscription’ in Christopher’s case is correct and the fact that such an interpretation does not protect people who subscribe to shares in consideration for other shares is due to the fact that the legislature did not take such people into account when drafting Section 145 of the Act.
“This failure cannot be cured by attempting to give the word ‘subscription’ a meaning it was not intended to have,” Goldblatt wrote.
“Even if I am wrong in my interpretation of the word ‘subscription’ in Section 145 of the Act, I am of the view that the offer was not made to the public or a section of the public. This offer was made to a specific and peculiar group of persons who own specific assets which Harmony wishes to acquire by an exchange of shares,” he added.
On Friday from 11am at the group’s Randfontein offices, Harmony shareholders will vote at an extraordinary general meeting on six resolutions related to the Gold Fields bid and one special resolution to increase Harmony’s authorised share capital.
South Africa’s Competition Tribunal will also on Friday hear Gold Fields’ application to interdict Harmony’s early settlement offer to Gold Fields’ shareholders for 34,9% of Gold Fields, which closes on November 26 2004. — I-Net Bridge
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