Sibanye Gold Ltd (JSE: SGL; NYSE: SBGL), the largest individual producer of gold from South Africa and one of 10 largest gold producers globally, agreed to acquire Colorado-based Stillwater Mining Co. (NYSE: SWC) for $18.00 per share in cash representing an enterprise value of $2.2 billion.
Stillwater is the only U.S. miner of platinum group metals (PGMs) and the largest primary producer of PGMs outside of South Africa and the Russian Federation. PGMs are rare precious metals used in a wide variety of applications, including automobile catalysts, fuel cells, hydrogen purification, electronics, jewelry, dentistry, medicine and coinage.
Stillwater is engaged in the development, extraction and processing of PGMs from a geological formation in south-central Montana recognized as the J-M Reef. The J-M Reef is the only known significant source of PGMs in the U.S. and the highest-grade PGM resource known in the world. The company also recycles PGMs from spent catalytic converters and other industrial sources. The company owns the Marathon PGM-copper deposit in Ontario, Canada, and the Altar porphyry copper-gold deposit located in the San Juan province of Argentina.
The proposed purchase price represents a 61% premium to Stillwater’s volume-weighted average share price over the 52 weeks prior to the announcement of the transaction, a 25% premium to its volume-weighted share price over the 30 trading days prior to the announcement and a 23% premium to its closing share price on December 8, 2016. The deal also represents a 14.0x multiple of IBES consensus 2017 EBITDA1 estimate.
Stillwater’s board of directors has unanimously approved the transaction. The closing is subject to shareholders’ and regulatory approvals and other customary closing conditions. Sibanye’s two largest shareholders, Gold One International Ltd. and Public Investment Corp. Ltd., which in aggregate represent 29% of Sibanye’s issued share capital, have confirmed their support of the deal. The parties expect the closing to occur in the second quarter of 2017.
“This compelling all-cash transaction delivers immediate value to shareholders and appropriately recognizes the value of Stillwater’s high-grade and long-life assets and world-class metallurgical and PGM recycling complex, as well as Stillwater’s potential for brown field expansions through the development of our Blitz and Lower East Boulder projects,” said Mick McMullen, CEO of Stillwater Mining.
Sibanye has secured bridge financing of $2.7 billion provided by Citi and HSBC to fund the transaction consideration and repay certain existing indebtedness of Stillwater. Stillwater is required to pay a break-up fee of $16.5 million and reimburse Sibanye for up to $10 million of expenses in the event the merger agreement is terminated. Sibanye is required to pay a reverse break-up fee of $33 million and reimburse Stillwater for up to $10 million of expenses in the event the merger agreement is terminated.
BofA Merrill Lynch acted as financial advisor to Stillwater, while Jones Day and Holland & Hart acted as legal counsel. Citigroup Global Markets Limited and HBSC Bank plc acted as financial advisors to Sibanye. Qinisele Resources acted as corporate advisor to Sibanye. ENSAfrica served as South African counsel to Sibanye, while Linklaters LLP served as legal counsel to Sibanye in the United States.