The world’s two biggest gold miners are in talks to create a global powerhouse for the production of the precious metal in the biggest takeover offer announced this year.
US-listed Newmont, already the world’s biggest gold miner by output, has launched an all-share bid for its Australian rival Newcrest that values the smaller company at around $24bn ($17bn) .
The move could trigger a bidding war for Newcrest, Australia’s biggest gold mining player. Analysts say rivals including Canada’s Barrick Gold and Agnico Eagle are also looking to consolidate the market.
Newcrest shares rose 10 percent to A$24.74 on the news, hitting their highest level since May.
Newmont’s $24 billion offer for Newcrest will be the largest M&A deal announced so far this year, according to data from Dealogic, easily surpassing the $7.5 billion acquisition of water treatment company Evoqua by technology group Xylem announced last month. Will leave
Newmont’s offer implies a 21 percent premium to Newcrest’s last closing share price.
Tom Palmer, Australian chief executive of Denver-based Newmont, said the deal was conditional on approval from Newcrest’s board and regulators.
“We believe the combination of Newmont and Newcrest presents a powerful value proposition for our respective shareholders, workforce and the communities in which we operate,” he said.
The combination would reunite the two companies after nearly a quarter of a century. Melbourne-based Newcrest was established in the 1960s as the Australia arm of Newmont and demerged in 1990 following a merger with BHP’s historic gold assets.
The combination of the historically linked companies would bring four of Australia’s five largest gold mines under the control of one company and would require Australian government approval.
The news of the talks was first reported by the Australian Financial Review.
Interest rates have risen sharply in Australia’s mining sector as a combination of rising costs, production issues for gold and the volatility in its price has led more companies to consider deals to boost their scale. has prompted.
Properties in stable countries such as Australia and Canada have come into focus. OZ Minerals, the South Australian nickel, copper and gold miner, is close to being acquired by BHP for $6.4 billion after Agnico Eagle and Pan American Silver paid $4.8 billion to acquire the company in Canada. Yamna Gold is being broken.
Newcrest is a big target for the biggest companies in the gold sector. It has mines in Australia, Canada and Papua New Guinea, and has been on the radar of both Newmont and Barrick in recent years. It has again become a target after the value of its stock nearly halved between April and September last year. Its long-serving chief executive officer Sandeep Biswas stepped down in December and the company has not yet named a permanent replacement.
Newcrest said it had already rejected one bid as too low, but did not rule out engaging with its larger rival, which submitted a higher indicative bid on Sunday.
The new offer, which will offer 0.38 Newmont shares for every Newcrest share, will also include plans to list Newmont on the Australian Stock Exchange. Newmont shareholders will control 70 percent of the combined company to Newcrest’s 30 percent.
Simon Mawhinney, chief investment officer at Newcrest’s largest shareholder Alan Gray, said he would not support a takeover by Newmont based on the proposed terms.
“Newcrest is too cheap. There is a risk of dilution,” he said. “The merger ratio is very sweet at half,” he said, noting that the Australian company was well funded and its long-term gold reserves should be highly valuable.
The approach could spook other bidders, said Mitch Ryan, an analyst at Jefferies, with Barrick linked with a takeover in 2018. They said.
Newcrest, which is being advised by JP Morgan and Gresham Advisory Partners, said it would consider a new bid. Newmont is being advised by Bank of America, Centerview Partners and Lazard.
Additional reporting by Hudson Lockett in Hong Kong