Investor Paulson Exploring AngloGold Split to Boost ValueKelly Bit
John Paulson, the billionaire whose hedge fund is the largest shareholder of AngloGold Ashanti Ltd., said Africa’s largest producer of the metal might increase in value if it were to split in two.
“We are exploring ways for AngloGold to improve its valuation,” Paulson’s New York-based hedge fund said in a year-end report that was obtained by Bloomberg News. “Based on our analysis, AngloGold’s shares could increase in value by up to 68 percent if the company was to split its business into South African and non-South African businesses.”
AngloGold, which is based in Johannesburg, appears to be “exploring options to improve their valuation,” Paulson & Co. said in the report about the firm’s Advantage funds.
Gold Fields Ltd., another South African gold miner in which Paulson invests, said in November it plans to spin off most of its operations in the country. Gold Fields said it will create a new company that will trade in Johannesburg and New York.
“AngloGold could also unlock value if it split into two companies: a high growth international business, and a mature high dividend paying South African company,” Paulson & Co. said.
AngloGold’s American depositary receipts rose 4.6 percent to close at $29.30 yesterday in New York. The ADRs have declined 36 percent in the past 12 months.
“AngloGold Ashanti values the views and feedback from all of its shareholders,” Stewart Bailey, a New York-based AngloGold spokesman, said yesterday in an e-mailed statement. “The board of directors and executive team are committed to maximizing value for all shareholders and consistently look at all options to enhance shareholder returns.”
Armel Leslie, a spokesman for Paulson & Co., said by e-mail he declined to comment.
The New York-based firm, which manages $18 billion in assets, has a 7.4 percent stake in AngloGold, according to data compiled by Bloomberg.
Paulson’s $4.9 billion Advantage funds, which seek to profit from corporate events such as takeovers and bankruptcies, and the $1 billion Gold Fund, which buys bullion-related equities and derivatives, fell last year.
Paulson’s Advantage Plus fund, which uses leverage to amplify returns, dropped 19 percent on bets that gold stocks would rise and that the European sovereign-debt crisis would worsen, while the Gold Fund slumped 25 percent in 2012.
Gold stocks plummeted 9.6 percent including reinvested dividends in 2012 as investors bought exchanged-traded bullion funds for exposure to the metal’s now 12-year rise, while producers battled surging costs to build and operate mines.
Paulson & Co. remains convinced gold stocks are undervalued and that the metal will climb and protect against rising inflation, according to a year-end report about the firm’s Gold Fund, which was obtained by Bloomberg News.
“We remain positive on the outlook for gold given the magnitude of the quantitative easing programs implemented by central banks around the world,” Paulson & Co. said. “While inflation has been subdued to date, this aggressive expansion of the monetary base creates the potential for future inflation.”
AngloGold, the Advantage funds’ biggest long position, or bet that a security will rise, said last month Chief Executive Officer Mark Cutifani will leave March 31 to become CEO of Anglo American Plc.
AngloGold in November cut its dividend by half and reduced planned spending by $200 million after its South African mines were shut down because of unauthorized work stoppages. It also operates in Mali, Australia, Brazil, Colombia and the U.S.
Cutifani said last year AngloGold had no immediate plans to split the business, an option the company has considered before.
“We have no plans today to split the business but all options must remain open,” he said in a Nov. 21 interview in Geneva. “If at end of the day we can’t get true value reflected for the global mix, then we have to look at all options. We’ve become a global company. South Africa is important, but it’s not critical.”
In October, John Hathaway, managing director at Tocqueville Asset Management LP, said AngloGold and Gold Fields should separate their troubled mines in South Africa from their foreign assets.