The separation will also cost R5.7bn in once-off charges.
Demerging is an expensive exercise. Anglo American Platinum (Amplats) – to be renamed Valterra Platinum on 1 June – will spend a total of R432 million in transaction costs alone related to its separation from parent Anglo American plc.
These will (mostly) be in the form of professional services fees, including investment bankers and lawyers.
Aside from this, it will also incur once-off costs of R5.2 billion related to the demerger.
Costs of Amplats unbundling from Anglo American
In the prospectus, it says it will cost the platinum group metal (PGM) producer R1 billion to set up its “standalone information management structure” as well as rebranding. A further “R45 million is expected to be incurred in relation to site and office costs, security costs, and marketing costs”.
The bulk of the once-off figure – R4.2 billion – “relates to the settlement of intercompany services between the Anglo American Group and [the soon-to-be-renamed Valterra], of which R2.85 billion was accrued as at 31 December 2024, and the remaining R1.35 billion was agreed in 2025”.
Services agreement
Valterra, as it will be known, on 8 April agreed an umbrella services agreement with Anglo American that will kick in once the demerger, which has been approved by shareholders, is completed on 31 May.
It says under the terms of this agreement, Anglo American “has been contracted to provide certain administrative services to the Group [Amplats/Valterra] during a transitional period” while they are established and/or migrated to Valterra.
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Amplats has always been part of Anglo. That’s just how it was – hence the reason for this convoluted arrangement.
The agreement specifically covers “the provision of staffing and resources principally in relation to finance, human resources, infrastructure operations, and information technology functions”. Valterra will pay its soon-to-be former parent R1.646 billion a year for these services.
Amplats says “shortly following completion of the Demerger, the Group [Amplats/Valterra] and the Anglo American Group will jointly prepare exit plans to transition the continuing services”. These timeframes typically run for 24 to 36 months.
The separation of Absa from Barclays plc (following the latter’s decision to divest) had a similar agreement.
However, due to Barclays originally migrating Absa onto its systems, it footed most of the bill for the very complicated split to get Absa back onto its own systems. In total, Barclays made a R12.6 billion contribution (payment) towards the separation programme.
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As part of the demerger, Valterra will list on both the JSE and the London Stock Exchange (LSE), with the latter to ensure that “the high number of Anglo American’s existing, UK-based shareholders will not be prevented from holding, or continuing to hold, shares in the company following the demerger”.
Anglo has said it will retain a shareholding in Valterra of 19.9% for at least 90 days following the demerger. Historically, it owned 67% of that business.
Tax windfall
The fiscus is set for a tax windfall due to the demerger, comprising $300 million in dividend-withholding tax, capital gains tax of $63 million, and securities transfer tax totalling $25 million.
At current exchange rates, this equates to R7.1 billion.
Under pressure from investors, Anglo announced a strategy in May 2024 to simplify its portfolio and focus on “copper, premium iron ore and crop nutrients (potash)”.
As part of this simplification, it announced that it would demerge a portion (read: the bulk) of its 67% stake in Amplats.
This article was republished from Moneyweb. Read the original here.
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