South Africa - Johannesburg - 19 February 2020 - Sibanye-Stillwater chief executive Neal Froneman. Picture:Nokuthula Mbatha/African News Agency(ANA)
South Africa - Johannesburg - 19 February 2020 - Sibanye-Stillwater chief executive Neal Froneman. Picture:Nokuthula Mbatha/African News Agency(ANA)

US Supreme Court ruling on merger boost for Sibanye

By Dineo Faku Time of article published Oct 19, 2020

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JOHANNESBURG - JSE-listed Sibanye-Stillwater on Friday received a major boost when the Delaware Supreme Court in the US affirmed last year’s decision by the Delaware Court of Chancery to uphold the deal price of the acquisition of Stillwater Mining Company.

Sibanye-Stillwater chief executive Neal Froneman said the affirmation by the Supreme Court confirmed that the firm had followed a process that was fair to all stakeholders.

“This again validates our decision to oppose the action and protect the interests of our stakeholders against spurious, opportunistic legal proceedings,” Froneman said.

The case dates to 2017 when Sibanye acquired US-based palladium producer Stillwater through a reverse triangular merger. As part of the merger agreement, each Stillwater share at closing was converted into the right to receive $18 a share. During the 138 days between the signing and the stockholder vote, no other bidder made a topping bid over $18 a share, but the price of palladium and Stillwater’s trading price increased. As a result, certain former Stillwater shareholders dissented over the merger and pursued legal action. However, last August the Court of Chancery found that the $18 a share deal price was the most persuasive indicator of Stillwater’s fair value at the time of the merger.

The petitioners then appealed the court's decision, arguing that the court had abused its discretion when it ignored the flawed sale process and petitioners’ argument for an upward adjustment to the merger consideration.

On Friday, the Supreme Court found that the Court of Chancery did not abuse its discretion when it deferred to the deal price as a reliable indicator of fair value without an upward adjustment.

“On review, this court holds that the Court of Chancery did not abuse its discretion when it relied on the deal price as the most reliable indicator of Stillwater’s fair value. Nor did the court abuse its discretion when it declined to adjust the deal price,” said court papers.

“So long as the Court of Chancery has committed no legal error, its factual findings will not be set aside on appeal unless they are clearly wrong and the doing of justice requires their overturn,” said the Supreme Court.

The petitioners had argued that the Court of Chancery had erroneously concluded that the flawed sale process was sufficient to defer completely to the merger price. They contend that the Court of Chancery disregarded “the facts of this case” and “failed to analyse the sale process for Stillwater to determine whether it provided reliable evidence of third-party market valuation.” The Supreme Court said contrary to petitioners representations, the Court of Chancery had examined Stillwater’s sale process, explained its reasoning, and grounded its conclusions in the relevant facts and law. It said the court had dedicated 56 pages of its 139-page decision to examine the reliability of the deal price and had addressed each of petitioners arguments concerning alleged defects in the pre- and post-signing phases.

“This court cannot hold that the Court of Chancery abused its discretion based on records before us,” said the Supreme Court.

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