Gold Fields is to appeal against a decision by the Competition Tribunal granting approval for rival Harmony’s proposed merger with the mining group.
The tribunal on Tuesday approved the proposed transaction, subject to conditions designed to ameliorate “certain potentially negative public interest consequences” arising from the merger.
It said the conditions provide that the merged entity does not, as a result of the merger, retrench more than 1Â 000 employees and this figure must include contracted employees. Moreover, possible retrenchments are confined to employees in management and supervisory grades.
The merged entity is also obliged to report retrenchments to the Competition Commission on a quarterly basis and to outline the reasons for any retrenchments that occur within 24 months of this order.
This will enable the commission to determine whether the retrenchments resulted from the merger or whether they arose from other unrelated factors, such as changes in the macro-economic environment.
Commenting on the tribunal’s decision, Gold Fields CEO Ian Cockerill said he had noted the further limitations that the tribunal had placed on the recommendations of the Competition Commission regarding retrenchments at the merged entity in the event of the successful implementation of Harmony’s hostile bid.
Previous conditions imposed by the Competition Commission, he said, had stated that Harmony may retrench up to 1Â 500 Gold Fields employees from the level of shift boss and up. On Tuesday, the tribunal tightened the retrenchment conditions and ruled that the number of employees Harmony may retrench at the merged entity as a result of the merger has been reduced from 1Â 500 to 1Â 000.
In addition, the tribunal also included “contract workers” in its definition of employees. These conditions are effective from the date of the tribunal order, for a period of 24 months.
“These conditions will make it impossible for Harmony to extract its exaggerated claims of cost-savings from Gold Fields’ operations. The market’s valuation of the spread between the respective share prices has already spoken to the fundamental value differential between the two companies. We urge Gold Fields’ shareholders to continue to protect value and reject Harmony,” Cockerill asserted.
Gold Fields contends that Harmony, by its own admission, during the course of argument to the tribunal on May 9 2005, stated that, “if the number of employees and contractors who may be retrenched by Harmony was cut by a third to 1Â 000, we would be considerably hampered”.
Cockerill, continued: “We are disappointed that the Competition Tribunal did not stop this bid in its entirety. The proposed merger will have significant negative implications for our employees, suppliers and mine communities. By approving this merger, the tribunal has forced Gold Fields’ employees to bear the brunt of Harmony’s bid. As an independent entity, Gold Fields does not need to retrench any of its employees. On these grounds and in the interests of job preservation, Gold Fields intends to appeal the clearance the tribunal has issued today.”
In addition to Tuesday’s ruling by the Competition Tribunal, the Competition Appeal Court (CAC) dismissed Harmony’s application for leave to appeal against the judgement granted by the CAC on the 26th November 2004, with costs. The CAC’s interdict of Harmony voting any of its shares in Gold Fields until final determination by the competition authorities of the merger application therefore stands and Harmony may not vote such shares as it may have acquired in Gold Fields until the CAC has finally determined Gold Fields’ appeal.
Meanwhile, Harmony announced on Wednesday that it has embarked on a legal process to investigate some of the comments attributed to Gold Fields executives and reported by the South African media on Monday.
“Harmony views these media reports in a serious light. We are tired of having Gold Fields executives and the media misrepresenting many issues ranging from Harmony’s financial statements to our competent persons’ report. For the media to headline mere allegations and spin is irresponsible. For the Gold Fields’ executives to make these allegations in the first place is more serious. They have gone one step too far this time,” commented chief executive Bernard Swanepoel.
“SRK conducted an independent analysis of our reserve statement. It has also reviewed and accepted the macroeconomic assumptions contained in our reserve statement. In the interests of full disclosure, SRK has also provided a range of macroeconomic scenarios under which it calculates our reserves, as we do in our annual report. The result of this process is that our estimate of proven and probable reserves of 55Â 651-million ounces as stated in January 2005, shows a 6% variance from SRK’s, and our life of mine production estimate of 62Â 347-million ounces shows a 3% variance from SRK’s.
These variances were highlighted some time ago by Harmony itself for the benefit of the investing public and are variances easily explained through subtle differences in certain technical assumptions in the respective calculations. We are satisfied that the SRK report re-affirms our January 2005 reserve statement,” Bernard added.
“It concerns us not only that certain Gold Fields employees continue to misrepresent the facts to the media, but more importantly to their own shareholders who continue to be disenfranchised in the process.
“We will not tolerate any further malicious misrepresentations, by Gold Fields or others.” said Bernard.
He said that Gold Fields executives will be invited to disassociate themselves from the media articles in the event that they have been misquoted. Failing this on or before 13 May 2005, legal action will be pursued against the individuals concerned, he said. – I-Net Bridge