South Africa's securities regulator SRP on Monday turned down an application by Gold Fields Ltd for Harmony Gold's $7.12 billion hostile take-over bid to be declared unlawful, strengthening the bidder's hand, a Harmony executive said. Ferdi Dippenaar, Harmony's marketing director, said the Securities Regulation Panel's (SRP) ruling, that the actions of Harmony and of Russia's Norilsk Nickel did not amount to parties acting in concert, meant the SRP had turned down Gold Fields' application.
"On the allegations by Gold Fields that our offer to their shareholders was unlawful, the SRP has now ruled that it is an acceptable structure. We are going on, marching ahead to our shareholders meeting on Friday," Dippenaar said.
Harmony, the world's sixth-biggest gold producer, is seeking to create the world's biggest gold miner by swallowing number four Gold Fields in an all-share deal, with the backing of Norilsk Nickel, which holds a 20 percent stake.
A Gold Fields spokesman, reacting to the regulator's ruling, said the mining group's board would continue to protect shareholders and intended to appeal against the decision.
Gold Fields, which sued Harmony in a US court on Friday in an attempt to halt the bid, has already launched legal action in South Africa and is seeking to block the take-over offer via the country's Competition Commission.
Earlier on Monday, ahead of the November 12 Harmony shareholders vote on the take-over offer, Gold Fields urged Harmony investors to vote against the offer, saying it was high risk and offered few rewards.
"The Harmony Board is undertaking a very risky acquisition strategy at your expense," Gold Fields said in a letter to Harmony shareholders.
Harmony said in a statement that the legal and other actions by Gold Fields, which has been planning a deal with Canada's Iamgold, were attempts to distract from issues which should have been put before shareholders.
"It is clear to Harmony that all of these frustrating legal actions form a strategy by Gold Fields' board and management to divert attention from their value-destroying Iamgold Corporation, Inc proposal and to prevent Gold Fields' shareholders from exercising their rights to consider a valid offer," Harmony said.
Gold Fields claimed in the US legal action, launched in the US District Court for the Southern District of New York, that Harmony had violated US securities laws with its two-step offer for Gold Fields' shares.
On Monday Gold Fields said the transaction would destroy value.
"It is rare indeed that a hostile take-over bid has combined such value destructive potential with such little merit," Gold Fields said in the letter to Harmony shareholders.
"The Gold Fields board will continue to fight Harmony's offer, which is coercive and which will put the fate of these two South African companies largely in the hands of opportunistic arbitrageurs with no long term investment intentions".
In a separate statement, Gold Fields also said it had appointed South African-based investment bank Andisa Capital as an additional adviser on the take-over bid, following a ruling by the Securities Regulation Panel that Goldman Sachs and J.P. Morgan were not appropriate external advisors.
Goldman and J.P. Morgan will continue to advise Gold Fields on the take-over bid, Gold Fields said.
Harmony shares were 1.43 percent down at 69 rand by 1354 GMT, while Gold Fields stock stood unchanged at 85 rand. Both stocks underperformed the JSE Securities Exchange's gold sector which was 1.0 percent higher.