When South Africa's Harmony Gold Mining (NYSE:HMY) made its initial tender offer to acquire fellow countryman Gold Fields Limited (NYSE:GFI) late last year, Harmony got a less-than-enthusiastic response. To paraphrase the classic gold-rush movie Treasure of the Sierra Madre, Gold Fields said it didn't need no stinking buyout. That's the kind of reaction that Harmony appears to be having now to Gold Fields' shareholders, the majority of whom are unwilling to sell out to Harmony.
Back in October 2004, Harmony offered to trade Gold Fields 1.275 shares of itself for every share of Gold Fields it owned. At the time, Harmony was trading for around $13 a share, and with Gold Fields shares trading hands at $14 or so per stub, the buyout offer valued Gold Fields at about a 20% premium to its market cap.
"Not good enough," replied Gold Fields' board, rejecting Harmony's offer on the very day it was made. And so began the saga that ended Wednesday with Harmony's admission of defeat. Harmony cited a decision by South Africa's High Court-- a ruling that Harmony's tender offer expired in December -- in deciding to return all shares, previously tendered to Harmony, back to their owners.
But the saga may not be officially over just yet. Under South Africa's takeover code, a company whose tender offer lapses is precluded from making a renewed tender offer for 12 months from the date of the lapse -- so Harmony's been put on hold through December 18, 2005. Still, the court's decision has certainly put this movie on a long "pause."
That gives both sides to this feud a good, long time to stop and survey the damage from their spat. Gold Fields has seen 25% of its market cap eroded, in large part because of the uncertainty about its fate in the takeover battle. But as in most unsuccessful wars, the aggressor looks the worse for wear: Since announcing its tender offer, Harmony has lost a full 45% of its market cap.
Thus, it's only at the end of this saga that we see its true origins: First, the market clearly thinks Gold Fields is the better company, and Harmony was right to want to own it. And second, for that very reason, Gold Fields was right to reject Harmony all along.
For more 24-karat Foolish writing, read:
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Fool contributor Rich Smith does not own either of the companies mentioned in this article.
