Randgold "unlikely to win Ashanti bid"

Plans by Randgold Resources to launch an audacious rival bid for Ashanti are unlikely to snatch the prize from AngloGold with its greater resources and expertise, analysts said on Friday.

"Randgold is probably going to give it a go but I don't think they have the balance sheet to pull it off," said gold analyst Leon Esterhuizen at Investec Securities.

Randgold is expected to launch a rival bid to AngloGold's $1.1-billion all-share offer as early as next week and has been encouraged to do so by the Ghanaian government, which holds a 17 percent stake in Ashanti, sources told Reuters on Thursday.

Randgold and AngloGold declined to comment while a spokesperson for Ashanti in London said it never commented on market rumours. A response from Ghana's government is still awaited.

The bid from AngloGold, South Africa's biggest gold producer, would create a company able to challenge the supremacy of the world's leading gold miner Newmont Mining Corp..

AngloGold already has the backing of Lonmin Plc, which owns 32 percent of Ashanti, although the platinum miner has indicated it might consider rivals if they were in cash.

Ghana's government owns a 17 percent stake in Ashanti and has the power to veto any acquisition. Although officials have said they do not oppose the deal, they have engaged Societe Generale to advise them on the competitiveness of the bid, which valued Ashanti at around $8.9 per share on Friday.

For Randgold, pulling together a more valuable cash bid could be a sticking point, analysts said, as it is about half the size of Ashanti. That could mean the deal would be structured as a reverse takeover, analysts said.

"It's a very tall ask to take over a company twice as big by market capitalisation," said one analyst who asked not to be named. Randgold's shareholder equity is around $140-million — but it has no debt.

Major investment

AngloGold has also offered the carrot of investing $570-million for deep level mining development at Ghana's massive Obuasi operation.

"AngloGold is sending a clear message to Ghana's government that it is facing declining yields from that mine without the company's input. Randgold would have to come up with that funding too," the analyst said.

Randgold also lacks the operational expertise of AngloGold, analysts said, as its main interest is in managed mineral rights through its Minrico unit.

But for the Ghana government, which has been arguing with AngloGold about the extent and longevity of its veto rights after any takeover, a Randgold bid could have advantages.

"Maybe Randgold would be happier to have a bigger participation from the Ghana government," said a Johannesburg-based analyst who asked not to be named.

For Randgold, the deal would catapult it into a medium-sized firm with operations in a number of different countries, diversifying from its current narrow base, analysts said.

But AngloGold is likely to fight hard to keep its prize.

"I would expect AngloGold to come back with something higher if Randgold bids," said the Johannesburg analyst. "I think AngloGold is the one that's likely to prevail. It's got more money and can wring more out of the deal in terms of savings, which means value for investors."