Minorco Offers $4.9 Billion--a British Record--for Consolidated Gold

A South African mining conglomerate launched the largest takeover bid in British history Wednesday with a $4.9-billion offer for Consolidated Gold Fields PLC.

Consolidated, which controls 8% of the world’s annual gold production, quickly rejected the bid, which sparked concerns about a South African monopoly in the gold mining business.

The offer by Minorco S.A. for the 71% stake it doesn’t already own in London-based Consolidated would significantly strengthen South Africa’s dominance over the Western world’s gold production. Consolidated is the world’s second largest gold producer behind South Africa’s Anglo American Corp., which controls Minorco along with De Beers Consolidated Mines Ltd.

Minorco offered $21.94 worth of cash and stock for each of the shares it doesn’t already own. Minorco already holds 29% of Consolidated’s about 213 million shares outstanding, excluding options, a stake bought mainly in 1981.

On London’s Stock Exchange, Consolidated’s shares shot above the takeover offer price to finish at $23.52 a share, up from Tuesday’s closing price of $18.11.

If successful, the bid would surpass Britain’s largest completed takeover, Nestle S.A.’s $4.3-billion acquisition of confectioner Rowntree PLC earlier this year, according to the industry publication Mergers and Acquisitions.

The offer for Consolidated immediately sparked a controversy even though Anglo American and De Beers said they would relinquish control of the publicly held, Luxembourg-based Minorco and Minorco said it plans to sell Consolidated’s South African interests.

“It would mean that Anglo American would control the gold industry,” said one mining analyst at a London investment firm, who didn’t want to be identified.

The analyst said he expected the offer to be reviewed by the British government through its Department of Trade and Industry.

Tim Read, director of mining at the London investment firm Smith New Court Ltd., noting that Minorco would be gaining control of substantial gold mining operations on other continents, said: “In terms of the dominance of gold mining, you can make a judgment for yourself.”

Sixty percent of the world’s gold is mined in South Africa. The acquisition would raise South African control to about 70% of the non-communist world’s production, analysts said.

Analysts expressed concern that such a takeover might hamper Consolidated’s businesses.

“There may be a problem with local governments and shareholders’ resentment to South African control,” said Rob Davies, a mining analyst with Shearson Lehman Hutton Securities Inc. in London.

South Africa’s system of apartheid, which sustains white minority rule over a black majority, has many opponents around the world.

Consolidated, which has been the subject of takeover rumors in recent years, described the bid as “lacking financial justification” and “devoid of commercial logic.”

Minorco said the bid fits in with its strategy to become a worldwide natural resources group with direct operating control of its activities.

Its current Consolidated stake “represents too large a proportion of Minorco’s assets to remain a passive investment,” the company said. Minorco said that if its bid succeeds, it would immediately begin negotiations to sell Consolidated’s 38% holding in Gold Fields South Africa and would review the target’s 49.3% stake in Newmont Mining Corp. of the United States.

The stock-swap part of Minorco’s bid would result in an increase in the number of its own outstanding shares and effectively reduce the combined holdings of the company’s two major shareholders to a minority stake. Anglo American’s holding would shrink to 26.6% from 39.1% and De Beers’ to 14.3% from 21%.

The wealthy South African Oppenheimer family holds unspecified stakes in the two companies.