I read with interest of the resignation of Chris Griffith as Gold Fields CEO following the failure of Gold Fields to complete the acquisition of Yamana, a Canadian gold producer. Notwithstanding Griffith’s mea culpa, it’s fair to say that he jumped before he was pushed.
Yamana, was snatched from Gold Fields by another Canadian gold producer, Agnico Eagle. I say snatched, because negotiations were complete, SA Reserve Bank approval was in place and the only outstanding item was the prickly issue of shareholder approval. Griffith certainly thought the deal was done and dusted until Agnico Eagle came along and spoiled the party by snatching Yamana from Gold Fields, like a Hyena snatching prey from a hapless Leopard.
The reason was all in the final offer price. Although the Gold Fields offer was initially higher at nearly $7bln, it was an all-share deal and the value of the deal declined to below $4bln as the Gold Fields share price started to falter due more to sector sentiment, than anything the company did. Griffith was loathed to increase his offer, wary about not getting into a bidding war. As a result, the Agnico offer of a $4.8bln share-and-cash deal became the more attractive option for Shareholders and they accepted that offer instead.
There are various reasons for the high failure rates, with one of the key reasons being overpaying for an acquisition, especially when in a competitive bid situation. Too many CEOs let their ego get to them once a rival bidder arrives on the scene and they feel that they have to win the deal at all costs, resulting in paying too much for the asset and the subsequent destruction of shareholder value.
This is why I truly feel that Griffith was hard done by. My view is that Gold Fields is sending the wrong message by forcing out a CEO who simply wanted to avoid destroying shareholder value. After all, what message are they sending to any incoming CEO: – You make sure you win an acquisition battle no matter what the cost? Talk about encouraging the wrong kind of behaviour. Frank Vein: Founder – Future Capital Training & Consulting www.futurecapital.global