South African gold miner Harmony Gold Mining Company
In its effort to become the world's biggest gold miner, Harmony already had the support of Russia's Norilsk Nickel in the bag. These friends from the north were committed to selling Harmony their 20% stake in Gold Fields. Harmony's next step was to offer to buy 34.9% of Gold Fields' shares for 1.275 shares in Harmony apiece. At the time that offer was originally made, it represented a premium to Gold Fields' share price. By today, though, investor distaste with the transaction and the international legal brouhaha it sparked had eliminated that premium -- actually transforming Harmony's offer into a discount to Gold Fields' own share price. At the offered exchange rate, Harmony was essentially offering to buy shares worth $14.27 for $13.53 apiece.
Not a bad deal, if you can get it -- but the trick is convincing people to trade in their shares for less than the market is willing to pay for them. Somehow, though, Harmony found some willing sellers and, yesterday, a full 10.8% of Gold Fields' shareholders said "OK."
Still, this is a far cry from the victory that Harmony had sought. It's nothing like, for example, the resounding 60% endorsement by PeopleSoft
To make this strange tale even stranger, Harmony now says the 10.8% acceptance figure "provides strong impetus" for the company to proceed with making "Part II" of its tender offer, this time for all remaining Gold Fields shares. Industry analysts believe that for Harmony to succeed with its second attempt, it will have to sweeten its offer price considerably. If it fails to do so, it seems unlikely that its second attempt will meet with any greater success than its first.
That would hurt Harmony's stock price, but probably help both Gold Fields' (which has dropped 4.5% in value since the takeover saga began), and that of Gold Fields' own preferred merger partner, Iamgold
For more 24-carat Foolish writing, read:
- Gold Fever Fuels Feud
- Will This Takeover Plan Turn Into Gold?
- Gold: the Anti-Dollar
- Mind the Golden Rule
- Russia on a Western Buying Spree
Fool contributor Rich Smith has no interest in any company mentioned in this article.