Newmont Raises Newcrest Bid to $19.5 Billion
US gold giant Newmont Corp. has made a fresh bid for Australian rival Newcrest Mining Ltd., sweetening its record offer to A$29.4 billion ($19.5 billion) to bring closer the prospect of a precious metal behemoth.
The deal also allows Newcrest to pay a franked special dividend of up to $1.10 per share. That adds up to a combined implied value of A$32.87 per share, representing a more than 46% premium to Newcrest’s undisturbed price before February’s bid.
The Australian miner jumped on the news, closing 5.2% higher at A$29.74 in Sydney. Newmont shares dropped 0.9% to $50.63 as of 9:56 a.m. in New York on Tuesday.
The deal — the largest gold mining takeover, if completed — is key to Newmont’s effort to increase output and extend its lead over other bullion mining rivals like Barrick Gold Corp., increasing its appeal to generalist investors. It will also increase Newmont’s exposure to copper, a key material in the clean energy transition, at a time when analysts are predicting major shortages of the wiring metal over the coming decade. Newcrest wants copper to make up more than 50% of revenue by the end of the decade, up from around a quarter now.
“Together as the clear gold-mining leader, we would be well-positioned to generate strong, stable and lasting returns with best-in-class sustainability performance for decades to come,” Newmont Chief Executive Tom Palmer said in a statement.
Major Newcrest shareholder Allan Gray Ltd. described itself as “positively disposed to this transaction.” The asset manager holds a 7.3% stake in Newcrest, according to data compiled by Bloomberg, making it the second-biggest shareholder behind BlackRock Inc.
“Previously I felt that the scrip ratio on offer didn’t strike the right balance, and unnecessarily favored Newmont shareholders. It’s clear that this is an improvement,” Simon Mawhinney, chief investment officer of Allan Gray Australia Pty Ltd., said.
“Even though I feel the market, and possibly Newmont, underappreciates Newcrest’s assets, I don’t feel anywhere near aggrieved enough to try and scupper a transaction like this.”
Morgans Financial analyst Sharad Bhat described the offer as “a reasonable price.”
Newmont’s New Bid Could Be Win-Win Given Production, Reserves
Dealmaking activity in the mining sector has ramped up in recent months, after two years of rising commodity prices have left many mining companies awash with cash — but still short of future production. Last week, Canadian miner Teck Resources Ltd. rejected a takeover bid from Anglo-Swiss commodities giant Glencore PLC for $23 billion.
Newmont’s offer follows other large gold deals including the $5.2 billion takeover of Yamana Gold Inc. and Agnico Eagle Mines Ltd.’s $10.4 billion takeover of Kirkland Lake Gold Ltd. a year ago.
The dividend component of the proposal takes advantage of an Australian tax law that grants domestic shareholders in local companies tax credits, but would not be available following the acquisition by the US company. These credits — based on the principal that corporation tax and personal income tax are interchangeable — can be “incredibly attractive to Australian-domiciled shareholders,” Mawhinney said, adding it was a key reason he liked the offer.
Newcrest said it had opened its books for “confirmatory due diligence,” but the deal still has several hurdles to cross, including securing a recommendation from Newcrest’s board. Due diligence is expected to take approximately four weeks. Newmont has indicated its offer is its “best and final”.
Newcrest is being advised by JPMorgan Chase & Co. and Gresham Advisory Partners Ltd. Newmont has engaged BofA Securities, Centerview Partners LLC and Lazard Ltd. as its financial advisers.