Heraeus Gold Refinery Buys Swiss Refiner Argor-Heraeus

6 April 2017

by Mark O’Byrne, Gold Core:

– Heraeus gold and precious metals refinery buys Swiss refinery Argor-Heraeus
– Heraeus reported to have paid “few hundred million euros for the remaining Argor shares”
– Argor-Heraeus “goodwill” alone reported to have been valued at over “half a billion Swiss francs”
– Global technology & precious metals refiner Heraeus will acquire stakes from Commerzbank and Austrian Mint
– Heraeus involved with Argor-Heraeus since 1986
– Swiss refinery Argor Heraeus once fully-owned by UBS
– Heraeus to profit from Argor’s competence for gold and silver refining and international footprint
– Prudent Germans know history and love gold

Heraeus, the family owned German global technology and precious metals refining company has announced that it is to buy one of Switzerland’s largest gold and silver refineries, Argor-Heraeus.

Heraeus gold and precious metals refinery is one of the world’s largest provider of precious metals services and Heraeus gold bars are some of the most trusted gold bars in the markets.

It is rumoured to have agreed to pay some €300 million for the 67% stake, taking its total holdings up to 100%. According to the Handelsblatt, goodwill alone “was estimated at around half a billion Swiss francs.”

The move by Heraeus gold refinery to buy the remaining 67% does not change the face of Argor-Heraeus from a Swiss-based refinery to a German one. Whilst is headquartered in Mendrisio (Ticino, Switzerland) it has ‘international branch offices in Germany, Italy and Chile.’

Argor’s gold refining is not purely Swiss either, Argor-Heraeus operates gold refining and gold bar production facilities in Hanau, Hong Kong, and Newark (New Jersey).

The Argor-Heraeus company was founded in 1951 and in 1973 the Union Bank of Switzerland (UBS) acquired full ownership of the refinery. Hereaus has held a stake in the Swiss refinery since 1986 when UBS and Heraeus Group (Germany) formed a joint venture, creating Argor-Heraeus SA.

Since 1999 UBS has not been involved and Argor-Heraeus has been owned by private companies, with Heraeus holding 33% of Argor-Heraeus shares, Commerzbank holding 32.7% of the equity, the Austrian Mint holding another 30%, and Argor-Heraeus’s management holding the balance of shares.

Heraeus describes itself as a ‘global technology company’ and plan to “fully profit from Argors competence and capacity for gold and silver,” according to Heraeus CEO Jan Rinnert in a statement released this week.

What does AG do?

Heraeus has an annual gold output of 400- 500 tonnes of gold per year, they produce 10% of the roughly 5,000 tonnes of gold refined by the top seven gold refineries.

What is still known as Argor-Heraeus, sits within just a few kilometres of Valcambi (the world’s largest gold refinery) and PAMP.

According to goldbarsworldwide.com Argor-Heraeus has the following facilities:

(1) Gold refining and the recycling of scrap
(2) Gold semi-finished products for the watch & jewellery industries
(3) Gold medals & coins
(4) Gold bars
(5) Precious metals services and logistics

When it comes to gold bars, it is  ‘renowned for its manufacture of customized bars for banks around the world, notably in Europe, CIS and Middle East.’ It is involved in the ‘entire distribution chain for precious metals, from the mine to the end user, to the benefit of all partners involved.’

London Good Delivery

Argor-Heraeus has a close relationship with the LBMA which goes back a long way. In 1952 it became the first LBMA accredited refiner to have ‘manufactured a range of minted bars’.

It has produced London Good Delivery gold bars since 1961. Today it also produces silver, platinum and palladium Good Delivery bars and in 2004 it became one of five London Good Delivery referees appointed by the LBMA, for gold and silver.

Why buy the whole company?

Currently precious metals account for €1.9billion of Heraeus’ €12.9 billion total revenues (2015 financial year). As stated above, the company has been involved with the Swiss refinery business since 1986 and owned 33% of the business, prior to this latest purchase.

In late 2016 it was revealed that other buyers had been sniffing around the Argor-Heraeus business. S&P Global Platts reported that Capvis, a Swiss private equity company, was looking to buy the Swiss refinery for €200 million, by early 2017. However, the deal fell through when the price was deemed too high.

The Capris deal may have fallen through as Heraeus were beginning to make interested noises about buying. The company would clearly had total transparency on all activities within the refinery business and would have been in a better place to make an offer. Interestingly, it knew enough to make it happy to pay over one-third more than Capvis were purportedly considering.

Heraeus describes itself as a ‘global technology company’. When it comes to precious metals its expertise is mainly in the platinum group of metals. In a statement announcing the sale Heraeus CEO Jan Rinnert said the company plans to “fully profit from Argors competence and capacity for gold and silver.”

Rinnert is clearly hoping that Argor-Heraeus’ expertise and infrastructure in the gold and silver market will go a significant way in the parent company’s power across the precious metal industry. Whilst Argor-Heraeus has locations outside of Switzerland (see above) the new owner can complement this with its own infrastructure that extends to Asia, North America and India, as well as its German headquarters. There are obvious synergies there.

The acquisition is yet another one in the Swiss gold and precious metals refining sector. It comes after the acquisition of Neuchâtel based Metalor Technologies by Japanese Tanaka Precious Metals in July 2016. In the summer of 2015, Indian group Rajesh Exports announced the takeover of Ticino-based Swiss gold and silver refiner Valcambi.

Prudent Germans know history and value gold

One thing that hasn’t been covered above, or in any of the press coverage is the consideration Heraeus must have made regarding the outlook for the gold and silver market. Why would you acquire one-third more for a company and pay such a high price for “goodwill” unless you were pretty confident of expected growth and future profits?

The refinery makes gold bars and silver bars for all involved in the gold market from central banks through to retail investors. This latest acquisition is one in a line of foreign acquisitions of Swiss refineries and says a lot about confidence in the gold market.

It also shows the value that Germans place on gold. Knowing history and especially monetary history and understanding the vulnerability of paper or electronic currencies that are being debased helps them in this regard.

It is another example of the understanding most German people and business owners have in the importance of and value of gold.

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