June 2024 saw the successful conclusion of the last leg of a rather complex multifaceted legal transaction, namely Johannesburg Stock Exchange (JSE)-listed Impala Platinum’s (Implats) strategic growth acquisition of its smaller rival platinum miner, Royal Bafokeng Platinum (RBPlat). This move, driven by the global demand for platinum group metals (PGMs) and an ever-changing competitive landscape, was aimed at securing the long-term viability of Implats’ own Rustenburg operations, and also to take over the shallower, mineral-rich, and more mechanised mines adjacent to its own deeper, ageing, and further operationally expensive ones – both strategically located in South Africa’s bushveld igneous complex in the North West province.
Alchemy was lead advisor to Implats and our lawyers are best positioned to give you, the reader, a behind-the-scenes look at how this was achieved.
The takeover of RBPlat was far from a straightforward merger and acquisition in South Africa’s mining market and it took two and a half years for Implats to implement it through various stages. Starting with a so-called “friendly approach” to fellow-listed RBPlat, then through the incremental on-market purchase of shares to build up a sizeable holding, and lastly making a public offer for the remainder of the shares in RBPlat. All whilst fighting off a proposed rival offer by Northam Platinum (Northam), then squeezing out the last remaining minorities and finally creating greater equity ownership for Rustenburg stakeholders in both Implats and RBPlat. After all of that, Implats then concluded a landmark 13% broad-based empowerment equity ownership transaction to drive sustainable economic inclusive activities in the PGM sector.
Behind the scenes, the preparatory legal work began in 2021 when Implats approached the board of fellow platinum miner RBPlat on a friendly basis to see whether a deal could be done, followed by a customary due diligence, which culminated with publicly announcing its intention to make an offer to acquire a majority shareholding in RBPlat. The process should have been fairly clear-cut with RBPlat open, at that time, to consider Implats’ offer and a reciprocal due diligence agreed to between the parties as the transaction proposed included a large scrip component. However, an unsolicited approach by Northam Platinum in November 2021 to acquire a sizeable stake in RBPlat, took Implats and the wider industry by surprise.
Because RBPlat was listed on the JSE at the time (it has since been delisted as a result of the Implats transaction), the whole process – both the Implats approach and the Northam intervention – was heavily regulated in terms of the Takeover Regulations promulgated under the South African Companies Act of 2008. The proposed deal suddenly became infinitely more complicated and Implats had to deal with the matter urgently and decisively.
Where it began
During the course of 2021, Implats commenced with friendly discussions with the board and major shareholders of RBPlat around a non-binding indicative proposal to acquire 100% of RBPlats-issued shares. Reciprocal due diligence exercises were completed and the requisite legal agreements were drawn up that would have given effect to such a transaction, by way of a scheme of arrangement as this was an agreed transaction between two willing parties. Seeing that both Implats and RBPlat were listed on the JSE at the time, a joint cautionary announcement was made late in October 2021 to alert shareholders of both companies to the potential transaction. In the background, Alchemy was advising Implats and leading the negotiation process for the transaction agreements.
Game-on
Within about 10 days of the joint cautionary announcement, Northam acquired a considerable chunk of RBPlat’s shares from the latter’s major community shareholder, Royal Bafokeng Holdings, and continued to increase that stake over the next few weeks up to a level where it was just below the threshold that would have required them to make a mandatory offer under the Takeover Regulations. With hindsight, it seems as if the acquisitions were carefully structured to avoid Northam having to make such a mandatory offer, as that would have required them to put up a sizeable amount of bank guarantees with the Takeover Regulation Panel — a very expensive exercise which Implats was willing to do.
With Northam having built up a stake but not having announced any offer for RBPlat and with Implats still very keen to acquire RBPlat, Implats immediately started building up its own pre-bid stake in RBPlat so that it could effectively counter any further Northam advances. This also ensured that it could use the protective provisions of the Takeover Regulations once it made a formal offer. Because of the regulated environment, this stake-building by Implats had to be done quickly, fairly, and with full transparency to the market, including crossing and cleansing of shareholders within a two-to-three-day timeframe given the public market nature of the transaction.
Implats then went on the offensive and publicly announced its offer to acquire RBPlat with a 24.5% -pre-bid stake — less than three weeks after Northam’s announcement. The offer held a compelling value proposition for investors to receive a combination of cash and high-quality liquid scrip in Implats as a leading integrated PGM producer. Duelling began between the two interested parties to secure a total controlling takeover. In December of the same year, Northam approached RBPlat with a non-binding offer but it never followed through or made a formal offer. Implats on the other hand continued to acquire further shares in RBPlat. A proper bidding war had begun.
Over the next few weeks, incremental purchasing of RBPlat shareholdings by both parties heated up with the world’s largest platinum mine, Bafokeng-Rasimone, dangling as the prize. Late in December 2021, Implats acquired just over 35% of the shares in RBPlat – at that level, it then had to convert its erstwhile voluntary offer to RBPlat shareholders to a mandatory offer under the Takeover Regulations. But, at the same time, it had to also apply to the South African Competition Authorities in order to meet the merger provisions of the South African Competition Act of 1998, which would have been triggered around the c.43% shareholding of effective control. This act requires approval from our competition authorities for any change of control of a business, and RBPlat was such a business.
The RBPlat shareholding, at this time, interestingly now reflected three key shareholders: Implats (35.6%), Northam (just under 35%), and The Public Investment Corporation (PIC) (10%). Implats had no intention of purchasing Northam’s stake at an elevated price and now had to take on Northam Platinum in what became a protracted legal battle. With the shareholding at these levels and with Implats still having an open mandatory offer out to the market, the matter was taken to the South African competition tribunals, where the next stage of the legal battle played out.
The Competition Tribunal approved the transaction in November 2022, and Implats obtained permission to acquire all the shares in RBPlat, subject to competition and public interest conditions, and in addition to Implats honouring its existing contracts.
It is worth noting though at this stage the different strategies that were followed – Implats was happy to formalise an offer for RBPlat and everything that went with it such as putting up bank guarantees with the Takeover Regulation Panel, a very costly exercise which required capital to be tied up for nearly 18 months, whilst Northam was very deliberate not to ever cross the 35% threshold that would have required it to make a mandatory offer for the whole of RBPlat. As an offer under the Takeover Regulations, Implats did get a limited level of regulatory protection but had to do everything in a fully transparent way to ensure market integrity.
The final acquisition push
Because of the protracted nature of the process, first the price war, then the competition process and the ever-present takeover code battles, Implats extended its offer several times. The deal-breaker occurred in May 2023 when Implats successfully concluded a deal with the PIC to acquire its 10% shareholding, resulting in Implats gaining majority control of RBPlat. Northam capitulated and eventually sold their shares into the Implats offer. It had certainly not been anticipated that it would take just over 18 months to reach this point.
From April to July, Implats continued to acquire shares in RBPlat. And finally, with a 98.35% shareholding, it was able to effectively ‘squeeze out’ the remaining shareholders by invoking section 124(4) of the Companies Act. Furthermore, the acquisition component of the transaction involved the delisting of RBPlat from the JSE and the approval of Implats’s listing of the offer consideration shares which was a critical requirement in its acquisition bid. This was approved by the JSE.
By this stage, approval from the Financial Surveillance Department of the South African Reserve Bank in terms of Exchange Control Regulations had been obtained.
As part of the approval conditions of the acquisition, Implats had agreed to promote greater broad-based empowerment in the company. The outcome of this was the final R9 billion deal that will result in broad-based black investors and stakeholders holding a 13% interest in Implats subsidiary, Impala Platinum Limited and the newly-acquired RBPlat subsidiary, Impala Bafokeng Platinum, through three fully vendor-funded components.
In closing
About the complexity and duration of the Implats deals, Alchemy senior partner Wildu du Plessis comments: “The scope and complexity of the multifaceted and numerous legal components of these dynamic transactions were certainly interesting and challenging. We were privileged to be involved and advise Impala Platinum on the ultimately economically beneficial outcomes for all participative stakeholders through the provision of pertinent and alternative solutions.”