Time is running out for Consolidated Gold Fields, an English firm that generates half its income from U.S. operations, to block a $4.9-billion hostile takeover by a South African-controlled company.
One of Consolidated’s U.S. subsidiaries is ARC America Corp. in Newport Beach, a construction materials company that has 3,300 employees in 24 states.
If legal action and requested government interference in Washington, New York and London fail to generate action by Tuesday, the huge firm will likely become part of the world’s largest gold producer, the Oppenheimer-DeBeers syndicate in South Africa.
In its broad-based attack, Gold Fields has appealed to President Reagan and British Prime Minister Margaret Thatcher to halt the takeover. The firm has enlisted the aid of a dozen U.S. congressmen as well as the prime ministers of Australia and New Guinea.
Executives at Gold Fields claim that the acquisition would put most of the world’s gold and strategic metal production in the hands of Minorco S.A., a Luxembourg firm controlled by Oppenheimer-DeBeers. South Africa, they argue, often has turned a cold shoulder toward U.S. interests.
In addition, they claim, the merger would destroy up to 27% of the firm’s U.S. construction materials business, which is run by its ARC subsidiary in Orange County.
Many of ARC’s major clients are local governments that have laws against doing business with South African-owned businesses. ARC and its British counterpart, ARC Ltd., provided Gold Fields with nearly three-quarters of its fiscal 1988 revenue of nearly $2.2 billion.
“We’re fighting an uphill battle, but we think we can win,” said Keith Orrell-Jones, the president of ARC America and chief executive of both ARC America and ARC Ltd.
“ARC’s fundamental concern--the thing that makes this different from other hostile takeovers--is that the new controllers of the firm would be perceived by our customers, especially in the United States, as South African-owned and controlled,” Orrell-Jones said.
‘Smoke Screen’ Seen
Minorco lawyers scoff at the characterizations.
“It’s just fallacious--a smoke screen,” Minorco lawyer Stuart Eizenstat said about Gold Fields’ claims.
He said that after the takeover, Minorco would sell off Gold Fields’ 38% stake in a South African gold mining firm and its 49% stake in Newmont Mining Corp. in New York, this nation’s largest gold mining firm.
“Minorco would be de-South Africanizing Gold Fields and re-Americanizing Newmont,” Eizenstat said. “Minorco and its affiliates then would control only 1.7% of the gold market and would have the same interest in strategic metals that Gold Fields has now.”
Gold Fields owns a 49% stake in Renison Goldfields Consolidated Ltd., an Australian firm that is a major producer of such strategic metals and minerals as platinum, titanium, zirconium and monazite. Eizenstat said Australian law prohibits Minorco from increasing that stake.
And the 60% stake that the Oppenheimer-DeBeers syndicate has in Minorco would drop to 46% because 80 million new shares would be sold, mainly to British citizens, he said.
The growing number of state laws and local ordinances forbidding government contracts with companies affiliated with South African firms may pose a problem, Eizenstat acknowledged. About 27% of ARC’s business is with government entities. Minorco would deal with those situations “on a case-by-case basis,” he said.
Gold Fields has attacked the deal on a number of fronts.
Lawyers argued Friday in U.S. District Court in New York over the company’s request for an order restraining Minorco temporarily from buying more stock in Gold Fields. The antitrust suit claims the takeover would give Oppenheimer-DeBeers, which already has a monopoly in the diamond market, control over one-third of the world’s gold.
Today, the federal judge in New York will decide if he should halt the deal until a more detailed court hearing can be held. Minorco owns 29% of Gold Fields, the limit allowed by British law before a takeover bid can be consummated.
In Washington, the Federal Trade Commission also is reviewing the deal to see if it illegally restrains trade in America.
In a commentary in the Wall Street Journal, former CIA Director Stansfield Turner called the proposed takeover “ominous” for the United States because of “a worldwide concentration of control over vital mineral resources that Oppenheimer Group would acquire.”
Gold Fields also has asked President Reagan to use new powers under the recently amended Defense Production Act to halt the deal as detrimental to U.S. national security because the strategic metals are used in submarines, spaceships and nuclear arms.
The amendment gives the President authority to initiate a national security investigation and prohibit the transfer of control over U.S. operations, such as Newmont Mining Corp.
As of Friday, 11 U.S. senators, one congressman and two governors have asked Reagan to order a national security investigation of the takeover.
National Interest Issue
The company said Friday that it forwarded new information to Reagan alleging that Oppenheimer-DeBeers has “a long history of exploiting their dominance over minerals production in ways that are disadvantageous to the United States.”
It claimed that the South African syndicate withheld industrial diamonds from the United States during World War II, secretly arranged with the Soviet Union to preserve their control over diamond pricing, and conspired to corner the market in 1978.
Eizenstat said the Defense Production Act simply doesn’t apply.
“The amendment only covers the acquisition of an American company by a foreign company, and it has to affect national security directly, not simply general commerce,” he said. “This is a purely European transaction. All the interests already are owned by a foreign company.”
In England, Gold Fields has asked the British Monopolies and Mergers Commission to investigate the deal. Orrell-Jones said that just opening the investigation would likely cause Minorco to pull out.
Orrell-Jones said Reagan and the British commission must act by Tuesday because, under British law, Minorco can proceed with its acquisition attempts at 3 p.m. British time.