Gold giant Newmont’s $16.9 billion bid for Australia’s Newcrest clouded by deal doubts


Newmont’s Leading Gold Producer

Corp says it has made a $16.9 billion offer for Australian peer Newcrest

Mining to build a massive global gold base, though investors and analysts say they’ve undervalued their target amid a leadership change.

Newcrest is looking for a new boss, with previous chief executive Sandeep Biswas stepping down in December, while global interest rates are expected to peak this year and fall, boosting growth. hope for gold price.

The Australian gold miner said it was considering a proposal to share the whole thing in a filing in response to media speculation over the weekend. Initial response from shareholders was that they wanted a higher price, according to a person familiar with the Newcrest discussions.

Simon Mawhinney, chief investment officer of Allan Gray, Newcrest’s largest shareholder with a ratio of 7.36, said: “A good test of a reasonably priced deal is one where both the seller and the buyer are concerned. Buyers feel a little uncomfortable because they sell too low or pay too much. % share. “It’s not clear to me that this kind of symmetry exists with these terms of the agreement.”

Shares in Newcrest jumped as much as 14.4% to AU$25.60 ($17.77), its highest since May 2022, but still well below its current implied asking price of 27, $16, indicating that investors do not believe the deal will succeed. Shares closed 9.3% higher at AU$24.53.

Newmont, which is already the world’s largest gold producer by market capitalization and by ounces produced, said the combination represents “a strong value proposition”.

Newcrest’s operations include leading Cadia assets in Australia, an expanding footprint in North America and Papua New Guinea, and growth potential in copper, highly regarded as key to the energy transition . BHP

Group offers $6.4 billion to Australian copper miner Oz

Minerals Minerals in December.

Newmont’s proposal to adopt an agreed-upon arrangement, which should be recommended by the Newcrest board of directors and is subject to due diligence, various regulatory approvals, and a shareholder vote can last for many months.

Morningstar analyst Jon Mills noted that the indicative offer implies a 21% premium over Newcrest’s final closing value of AU$22.45, which is significantly lower than the redemption premium. The traditional 30%, Morningstar analyst Jon Mills noted, values ​​Newcrest at around AU$31 per share.

Newcrest shareholders will receive 0.380 Newmont shares for each Newcrest share, giving them a 30% stake in the expanded mining company. That’s a 4.7% improvement over the previous 0.363-per-share offer that Newcrest rejected for not providing enough value to shareholders, Newcrest revealed on Monday.

Barrenjoey analyst Dan Morgan said if investors don’t back the deal, the board will be under pressure to improve Newcrest’s value, possibly by breaking up assets like Havieron and Telfer in Australia or Lihir in Papua New Guinea.

Newcrest is expected to announce a new chief executive this year after Biswas announced his retirement after eight years.

Sherry Duhe, formerly chief financial officer, who joined Newcrest last February, serves as interim chief executive while the global search for a replacement internally and externally is underway.

An investment banker who was not authorized to speak publicly on the matter said Newcrest has been considered a target in recent years due to its average performance, but only a handful of buyers were big enough to buy. buy it.

The all-inclusive nature of the offer means the timing is more likely to be related to Newcrest’s leadership flaw than a big call on gold prices, but it could also reflect a constructive view. for precious metals, the banker added.

Morgan Stanley in a note on January 16, noting that its macroeconomists are now forecasting lower interest rates and a weaker US dollar, in a report on January 16, risk Risks are growing for gold and a weaker US dollar, in favor of the metal.

Morgan Stanley is looking to increase the price of spot gold to $2,160 in the fourth quarter, up from $1,866 an ounce.


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