R4.5bn dealmaking unicorn shows which dogs on which Remco

The JSE witnessed a rarity yesterday. Nine times in 10, a major transaction results in the protagonists’ share prices moving in opposite directions. Analysts bet cold cash on who will benefit (and lose) in what is a zero sum game.

Not this time. The R4.5bn transfer of Anglo Platinum’s Rustenberg mines to Sibanye is a unicorn of dealmaking. A rare win-win: Sibanye’s shares rose 5%, AngloPlat’s gained 3%.

What the market movement is actually telling us is Sibanye’s CEO Neal Froneman will make a success where his Anglo Plat counterpart Chris Griffith has failed. In other words, investors say Froneman is by far the better manager.

Last year Froneman was paid R12.9m by Sibanye. Griffith took home R18.5m. To use a Buffettism, guess which company’s remuneration committee has the aggressive dobermans; and which the tail-wagging cocker spaniels?

From Biznews community member Warwick Oakley

Can’t agree with your assessment of Froneman as a better manager than Griffith. The latter achieved huge success at Kumba and will sort the Anglo mines out that’s for sure. Personally I think it a highly astute move to off-load a mine in a “poisoned “ sector to Sibanye.

I also think that someone like NF will intimidate the Remuneration Com at Sibanye more than someone like CG at Anglo. Bottom line is they both great managers and we should be proud of them. It’s not a contest and the market re-acts on diverging criteria.

From Biznews community member Jaco Rabie

The assumption that the share price movements is a direct commentary (and accurate one at that) on the managerial competence of the two CEOs involved‎ is lazy.

At bottom, the price movements reflect perceptions around value given and received. Other factors worth considering:

– the market thinks Griffith ability to off-load the asset in this market (in line with the mechanisation strategy announced over a year ago) shows a management that is able to implement announced strategy and shed old labour intensive assets in favour of more focus on more efficient mechanised mining;

– market perceives a better allocation of capital as a result in the future. It isn’t that it believes Griffith’s can’t sweat the asset as efficiently as Froneman, it is saying that he shouldn’t be trying, because he has better alternatives in the long term than struggling with high cost, labour intensive old assets. In short the market sees this as sensible capital allocation.

– market perceives Sibanye as having added a quality asset in the context of the Sibanye portfolio at a good price. ‎It could be saying that we don’t like gold long term as much as we like platinum at these prices. In other words, this is a better allocation of capital for Froneman than sticking to his old gold shafts. ‎In the context of his alternatives, he is gaining more than Griffith is giving away, but that is because he has fundamentally a lower quality portfolio.

In short, the market could be saying that in the long run, it is a good deal for both companies, but for different reasons. It is overly simplistic to assume that the market is accurately commenting on managerial capability in isolation. Then linking it to remuneration and making a normative judgement to boot with respect to the Remcos? Come on.

From Biznews community member Matthews Letlape

Applying the Buffetism. I think Sibanye’s committee have the tail wagging cocker spaniel. I guess my opinion is subject to scrutiny.

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