Small shareholders in public companies often feel left out in the cold, their opinions unvalued, their 0.001% stakes in their companies uncounted. Not so when you own a significant stake. Consider the influence that hedge fund ESL Investments had in driving forward the merger of Sears (NYSE:S) and Kmart (NASDAQ:KMRT), in which it owns 52% and 15% stakes, respectively. Or look at Carl Icahn and the monkey wrench he threw into Mylan's (NYSE:MYL) (a company in which he owns about 10% of outstanding shares) planned takeover of King Pharmaceuticals (NYSE:KG) last month.
Over the past few days, a similar scenario has developed in, of all places, Russia. There, mining magnate Norilsk Nickel (NQB: NILSY) has played the role of peacemaker, power broker, or king maker -- depending on your point of view -- in the hotly contested takeover saga of South Africa's Gold Fields Limited (NYSE:GFI) by its equally subequatorial Harmony Gold Mining Company (NYSE:HMY).
Norilsk bought a 20% stake in Gold Fields back in March. But once it was inside Gold Fields, oh what a case of corporate indigestion it caused! When Harmony launched a hostile takeover attempt of Gold Fields in October, the latter fought back with a flurry of lawsuits, to which Harmony responded with its own lawsuits as a major PR war broke out on both sides.
Meanwhile, Norilsk publicly betrayed its host, tendering its 20% stake in the company to Harmony on a golden platter and making no secret whatsoever about its desire for the merger to proceed. If that comes to pass, Norilsk would instantly upgrade its status as a 20% owner of the world's fourth-largest gold producer to a greater than 10% owner of the world's first-largest gold producer.
But so far, the response from Gold Fields' other shareholders has been lukewarm. And so over the weekend, Norilsk "invited" the CEOs of both South African companies to come and warm up at a cozy Siberian confab. The outcome of the talks is not known, save for vague statements by the parties that they are exploring other options, presumably alternatives to Harmony's continuing to wage its hostile takeover fight.
It's probably safe to assume that, if any deal emerges from the talks, it will involve a sweetened offer from Harmony -- something better than the current 7% discount from Gold Fields' current market price. Alternatively, Norilsk might ask Gold Fields to buy out its 20% stake at a hefty premium. If Harmony's left with just its existing 11.8% stake in Gold Fields, and little support for its bid among Gold Fields' other shareholders, a bit of "greenmail" for Norilsk might be all it takes to put Harmony's bid to rest for good.
For more 24-carat Foolish writing, read:
- Canadian Gold Doesn't Glitter
- Gold Offer Loses Shine
- Gold Fever Fuels Feud
- Will This Takeover Plan Turn Into Gold?
- Gold: the Anti-Dollar
Fool contributor Rich Smith has no interest in any company mentioned in this article.
