Newmont, the largest gold miner in the world, has increased its offer for Australian competitor Newcrest to $19.5 billion. This move aims to complete one of the largest takeovers of an Australian company and create a global powerhouse for precious metals.
In January, Newmont made an initial approach to the Australian miner, which it founded in the 1960s but demerged 30 years ago. However, its all-share bid in February valued the company at nearly $17 billion, which was rejected by Newcrest’s board.
This bid marked the beginning of a significant consolidation wave in the global commodities sector, including BHP’s acquisition of smaller rival OZ Minerals and Glencore’s unsolicited offer for Canada’s Teck Resources.
Although some potential bidders for Newcrest quickly ruled themselves out of a bidding war, its US suitor has improved the terms of its indicative offer to entice the company into opening its books on an exclusive basis. The new bid, labelled “best and final” by Newmont and 16% higher than its previous offer, will allow Newcrest shareholders to control 31% of the company. Newcrest has agreed to give access to its books to allow for due diligence work.
Through this deal, Newmont would enhance its exposure to valuable copper resources and increase its exposure to passive investment funds. Investors who were hesitant about the original offer have suggested that the improved terms would be enough to gain their support.
Simon Mawhinney, the managing director of Allan Gray, Newcrest’s largest shareholder, has stated that the company remains undervalued based on the potential of its mining assets. However, he believes that the improved bid from Newmont “struck a balance” for a reasonable deal. He added that he would support the deal if it is formally agreed, unless a higher offer emerges from a rival, as he would be able to maintain his exposure to Newcrest’s growth opportunity.
Following the announcement of the improved bid, Newcrest’s shares increased by 5% to A$29.74. This figure is still below the new offer price, which values the Australian company at over A$32 per share.
According to analysts, the improved bid is sufficient to close the deal, as Australian investors stand to benefit from exposure to a larger, more diverse asset base. However, regulators may still have a say, as the US company will own four of Australia’s five largest gold mines.
Tom Palmer, the chief executive of Newmont, stated in a release that the mining sector is entering a “new era” where sustainability and long-term value creation will be held to a higher standard. He added that the proposed transaction would strengthen the company’s position as the leading gold firm in the world by bringing together two of the industry’s top senior gold producers and setting new standards in safe, profitable, and responsible mining.
This potential deal would be the latest in a series of megadeals on the Australian market, including the sale of Sydney Airport, payment company Block’s acquisition of Afterpay, and the merger of BHP’s oil and gas operations with Woodside.
