Proposals for a new London-listed mining spin-off worth £3bn hit the dust yesterday, as shareholders at one of the world’s top gold miners revolted over a $2.1bn (£1.3bn) rights issue key to the massive restructuring.
South Africa-based AngloGold Ashanti was forced into a U-turn just five days after it announced it would spin off its international assets into a new company, leading to huge embarrassment for global banks advising on the deal.
The demerger collapse prompted analysts and investors to slam the quality of advice AngloGold had received from financial advisers including UBS and Goldman Sachs, who sources suggest would have received fees of around $20m.
With such a dramatic reversal in less than a week, questions were raised over why the market had not been sufficiently sounded out before launching the demerger and rights issue proposals.
Market reaction last week was instantly negative, as AngloGold shares fell nearly 15 per cent during trading last Wednesday after the restructuring plans were revealed.
The proposals received immediate harsh criticism from billionaire John Paulson, president of hedge fund Paulson and Co, one of AngloGold’s largest shareholders.
While Paulson was supportive of the concept of a restructuring, he said: “The way they are doing it with this massive dilutive equity offering, it is value-destructive.”
AngloGold yesterday said it had been in talks since last week with two-thirds of investors, and while there was “broad support for the strategic logic of the restructuring”, shareholders held firm in their opposition to the scale of share dilution.
The rights issue AngloGold proposed was vital to its plan, however, as the South African Reserve Bank had made clear to the Johannesburg headquartered miner that the South African business must be debt free to get approval for its demerger.
With the demerger proposals sunk for the foreseeable future, AngloGold yesterday suggested it would pursue a programme of asset sales instead, as it seeks to reduce its net debt of around $3.1bn.
On a conference call to investors yesterday, AngloGold chief executive Srinivasan Venkatakrishnan said “Asset sales are on the cards, and we will look at all options.”
AngloGold poured cold water on a suggestion by Investec analysts yesterday that it might wish to consider selling its jointly owned Kibali gold mine to partnering firm and rival Randgold Resources, as AngloGold considered it a tier one high value asset.
AngloGold did say it might consider joint ventures, however, for major assets in Colombia and Ghana.
AngloGold currently has 20 gold mining operations in 10 countries.
WHAT COULD HAVE BEEN
VALUE OF SCRAPPED SHARE SALE: $2.1bn
APPROX VALUATION OF ANGLOGOLD SPIN-OFF: $3bn
FALL IN SHARE PRICE AFTER PLANS UNVEILED: 15%
ANGLOGOLD'S DEBT TO EARNINGS RATI: x1.7