JOHANNESBURG (Business Day) -- JCI and Randgold & Exploration (R&E), both formerly run by late businessman Brett Kebble, released details of a possible merger yesterday that would put the value of the combined companies at R2.8 billion ($377.2 million).
The two companies said R&E should get between 71% and 81% of a merged entity, depending on exactly how much money JCI owes it as compensation for Kebble's theft of some of its assets.
A merger would be an important step in finally unravelling the mess left by Kebble more than 18 months ago, and will pave the way for a takeover, for which Aflease Gold [JSE:AFO] is seen as the frontrunner.
But the figures yesterday illustrate the extent to which investors in both companies could yet make a mint from any merger, with the values of both companies having climbed considerably over the past year.
This is attributable largely to Kebble's companies having held a big stake in Western Areas, stock which it swapped last year for shares in Gold Fields.
Of the R2.8 billion ($377.2 million) combined value of the companies, the shares in Gold Fields [NYSE:GFI; JSE:GFIELDS] are worth R1.8 billion ($242.5 million), or 65% of the value of a merged company.
Another R750 million ($101.3 million) of the R2.8 billion ($377.2 million) comes from the value of prospecting rights owned by the two companies.
However, this is far less certain, and the companies warned that this value was "inherently speculative due to the nature of those assets."
When R&E was suspended from trading, its shares were sitting at R8.90, which put a value of R665 million ($89.5 million) on the company. JCI shares were trading at R16 cents apiece, putting a value of R355 million ($335 million) on it.
Forensic reports released last year put the net asset value of both companies at R1.4 billion ($188.6 million), but yesterday's calculations put the value at more than double that.
Complicating a potential merger has been the calculation of a massive debt JCI owed to R&E for assets Kebble shunted into JCI. Mediators suggest a "rough estimate" would be that JCI owes R&E between R1.2 billion ($161.6 million) and R1.5 billion ($202 million).
Once this debt is factored into the bargain, R&E would be worth R2-R2.3 billion ($269.5-$309.9 million), while JCI would be worth R546-R846 million ($73.5-$114 million).
JCI included a value of R140 million ($18.8 million) of its interest in Boschendal, which it said was the most recent offer, and said that "the long-term value of the investment could be in excess of this amount."
Trinity Asset Management owns 15% of R&E, and Trinity MD Quinton George said yesterday that the boards "have to come up with a more specific recommendation."
"We have got a few loaded barrels, but we're keeping them on ice until we see a detailed settlement proposal," he said.
These loaded barrels include an interdict to prevent the merger going ahead due to the conflicts of interests among board members who sit on both JCI and R&E.
This includes Investec's David Nurek, who is chairman of both companies.
