South Africa's Harmony Gold has made an unsolicited 52.9 billion rand ($8.2 billion) bid to take over bigger domestic rival Gold Fields to create the world's biggest gold producer, it said on Monday.
Harmony, half the size by market capitalization of Gold Fields, offered 1.275 new shares for each Gold Fields share, which is at a 29 percent premium to Gold Fields' closing price on Oct. 14.
The bid hit Harmony shares hard with its stock falling as much as 9.83 percent to 75.29 rand. Shares in Gold Fields rose over 7 percent.
The combination of the two companies would form the world's biggest gold producer with production of around 7.5 million ounces of gold per year and the second-biggest in terms of market capitalization at around $11 billion.
Gold Fields, the world's number four gold miner, said its board had received an unsolicited proposal for a merger on Saturday, which has now lapsed.
Harmony said it was committed to acquiring the entire share capital of Gold Fields through an early settlement offer to buy up to 34.9 percent of Gold Fields' share capital, which will be followed by an immediate follow-on offer to acquire the remainder of the issued share capital.
The company said it had an irrevocable undertaking from major shareholder Russian metals giant Norilsk Nickel signed an agreement for a $2.1 billion merger that would give Gold Fields 70 percent ownership of the Canadian company.
Analysts said the proposed transaction could scupper the Iamgold merger.
On Friday, shares in Canada's Iamgold fell in busy dealings on renewed rumors that its planned merger with Gold Fields could be derailed by disgruntled shareholder Norilsk.
"Quite neatly it could resolve the problems between Gold Fields and Norilsk, because the relationship there seems to have soured since Gold Fields launched its bid for Iamgold. If this deal goes through, the Iamgold deal is off," said Charles Kernot, an analyst at Seymour Pierce in London.
Harmony said Gold Fields' plan was "unconvincing and difficult to justify from both a value and structural perspective.
"In addition, Harmony believes that the proposed Iamgold transaction has significant negative implications for Gold Fields, its shareholders, its South African asset portfolio and all of its stakeholders," Harmony said.
Internet mining publication Mineweb quoted unnamed sources saying Norilsk was rumored to have increased its Gold Fields stake to 30 percent from the 20 percent it bought earlier this year.
Gold Fields and Iamgold shareholders are set to vote in December on their tie-up, which needs the blessing of a majority of each companies' investors.
But since the Iamgold-Gold Fields deal was unveiled in August, speculation has surfaced repeatedly in Russia and South Africa that Norilsk, the world's biggest nickel producer, may want to block the transaction as it intrudes on its plans to become a large international gold producer with Gold Fields.