Local mergers top $11bn

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Workers process mineral sands at Richards Bay Minerals in KwaZulu-Natal. Rio Tintos purchase of a 37 percent stake in Richards Bay Minerals from rival BHP Billiton for $1.9 billion is the largest merger and acquisition transaction involving a South African company so far this year, according to Thomson Reuters.

Mergers and acquisitions (M&As) involving South African firms are worth $3.7 billion (R31.5bn) in the fourth quarter so far, compared with $2.8bn in the third quarter, according to information provider Thomson Reuters.

In the year to date, $11.4bn worth of deals have been announced in which South African companies were either targets or acquirers.

This is up from the $10.9bn in the same period last year but is less than half the 2010 peak, when the value was $24.3bn in the corresponding period.

Thomson Reuters said the biggest deal of this year was Rio Tinto’s $1.9bn acquisition of 37 percent of Richards Bay Minerals (RBM) from BHP Billiton. The transaction doubled the UK-based mining giant’s stake in the local titanium and iron ore producer to 74 percent.

BHP Billiton disposed of the stake so as to rationalise its mineral sands operation in South Africa.

When the deal was concluded in September, the Anglo-Australian mining company said the sale of its share in the South African mineral sands operator “reflects the company’s commitment to a simpler, more scalable upstream portfolio”.

Thomson Reuters noted that BHP Billiton had announced its intention to seek a buyer for its stake in RBM as early as 2007.

A deal still pending, according to Thomson Reuters, is the $1.5bn sale to Growthpoint Properties, the JSE’s biggest property company, of the entire share capital of Johannesburg-based real estate unit trust Fountainhead Property Trust.

The purchase will be paid for with 617.783 million Growthpoint shares, based on their value on October 22.

However, this transaction seems to be off the table. Business Report noted earlier this week that an independent committee, established by Fountainhead to consider rival unsolicited bids, had decided to engage exclusively with JSE-listed Redefine Properties.

Another pending property deal is the $985.1 million purchase of Durban-based SA Corporate Real Estate by the Capital Property Fund.

Settlement will be partly in cash and partly through the issuance of ordinary shares.

A group, which includes Chinese investors and the state-owned Industrial Development Corporation (IDC), has agreed to acquire 74.5 percent of Palabora Mining, a copper mining company in Phalaborwa, from Rio Tinto and Anglo American for $460.1m.

The acquiring group consists of the Hebei Iron and Steel Group of China (35 percent), the IDC (20 percent), General Nice Development of Hong Kong (25 percent) and the Tewoo Group of China (20 percent). Thomson Reuters described the deal as pending.

In April, Anglo American sold its 74 percent stake in Johannesburg-based Scaw Metals, a manufacturer and wholesaler of diversified steel products, for $437.2m.

The acquirers, backed by the IDC, are black economic empowerment groups Izingwe Holdings, Shanduka Resources and the Southern Palace Group. Anglo American had been seeking a buyer for the subsidiary since 2009, according to Thomson Reuters.

The involvement of the IDC reflects the intention of the government to promote local beneficiation of minerals such as iron ore.

Shanduka Resources is part of the Shanduka Group, founded in 2001 by Cyril Ramaphosa, the new ANC deputy president.

An investor group, which includes shareholders of Kalahari Resources, has agreed to acquire a 50 percent interest in manganese ore mining firm Kalagadi Manganese, from ArcelorMittal South Africa.

The deal, which was agreed last month, is worth just under $437m and will give Kalahari Resources a 40 percent stake in Kalagadi, while the IDC will own 10 percent.


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