Newmont lobs $32bn ‘final offer’ for gold miner Newcrest

Newcrest’s board has indicated it may smile on Newmont’s sweetened takeover bid, which could see the world’s largest gold miner list on the ASX.

Newmont will seek a secondary listing on the local market if its sweetened bid for Newcrest Mining is successful, as the Australian gold major’s board edges towards accepting the revised bid.

Newcrest’s board indicated on Tuesday it may smile on Newmont’s sweetened bid for the Australian gold major, agreeing to speak exclusively to the US mining giant as it conducts due diligence on its “best and final” scrip offer.

Newmont upped its bid to 0.4 shares for each Newcrest share on offer, lifting its bid by 10.1 per cent on a pure scrip basis.

But Newmont has also offered to allow its Australian target to pay a special dividend of up to $US1.10 a share if the deal closes – without reducing its offer – to allow Newcrest to extinguish its remaining franking credits, effectively boosting the total value of the sweetened bid by 16 per cent to Newcrest shareholders.

Newcrest in February knocked back a Newmont offer of 0.363 Newmont shares for each Newcrest share, but agreed to allow the US gold major a peek inside its books in an effort to win a better valuation of its growth ­assets.

That appears to have been a successful ploy, with Newcrest and the Papua New Guinea government last week ticking off on a framework agreement that should finally see its Wafi-Golpu project in PNG back on the path towards construction – seen as a major derisking event for the long-stalled project.

The new bid gives Newcrest an implied equity value of $29.4bn and enterprise value of $32bn. Newcrest investors will emerge owning 31.1 per cent of the combined group if the deal completes.

Newcrest said the revised bid valued its shares at $32.87. Under the proposal Newmont would apply for a secondary listing on the Australian Securities Exchange, allowing Australian shareholders to continue to hold and trade their shares as Chess Depositary Interests (CDIs).

Newcrest’s board did not give a formal recommendation on the offer on Tuesday, saying only that shareholders needed to take no action until a binding offer was submitted.

But, with Newmont saying its offer was “best and final” – but also conditional to a unanimous recommendation – the fact that Newcrest has agreed to speak exclusively with its suitor and will offer “confirmatory due diligence” indicates its board is likely to back the deal.

Newcrest said it expected that process to be completed within four weeks, allowing Newmont to make a binding offer.

If the bid moves forward on a friendly basis, Newcrest would also complete an independent expert report before putting the deal to a vote of its shareholders.

Newcrest went public with the Newmont offer in February, with no alternative suitors having come forward in public with a rival bid since then, suggesting Newmont’s latest bid is unlikely to be matched in the near term.

Some of Newcrest’s major ­institutional shareholders are already believed to have indicated in-principle support for a deal.

Allan Gray Australia chief investment officer Simon Mawhinney told The Australian the merger of the two companies would be good for shareholders, although he believed the US giant’s first offer had sold Newcrest shareholders short.

“This comes some way to balancing the scales. And I wouldn’t say it gets it entirely there – but neither do I expect it to. We’re at that position where we know we won’t thwart this deal based on the information we have in front of us at the moment,” he said.

Mr Mawhinney said Newmont’s offer to seek a secondary ASX listing meant local retail shareholders would be able to retain exposure to Newcrest’s assets, as they were able to do with Australian medical equipment giant ResMed, and gain exposure to Newmont’s broader gold ­portfolio. “This is going to be listed in Australia. Your brokerage account will continue to be able to trade it – nothing will change,” he said.

The sweetened bid comes after Newmont shares staged a 23.5 per cent rally in the past month on the back of the strengthening gold price, as sentiment for the precious metal firms.

Newmont boss Tom Palmer said in a statement the addition of Newcrest’s producing and growth assets to its own would position the company to “generate strong, stable and lasting ­returns with best-in-class sustainability performance for decades to come.”

“The proposed combination creates the industry’s best portfolio of world-class assets with the highest concentration of top-tier operations, primarily in favourable, low-risk mining jurisdictions,” he said.

RBC Capital Markets analyst Kaan Peker said the total deal premium was now about 30 per cent above Newcrest’s trading price before news of the Newmont offer was revealed to the public, and would give shareholders “upfront value realisation for its long-life gold-copper operations and projects and provide management certainty”.

“Alternatively, the deal may still be seen as opportunistic by NCM’s board and shareholders given short-term operational issues, an interim CEO, and a perceived lack of market appreciation for long-term project potential,” he said in a client note.

But Mr Kaan said RBC believed the revised offer presents “compelling” value for Newcrest holders when compared with other major gold mergers.

Newcrest shares closed up 5.1 per cent, or $1.44, to close at $29.71 on Tuesday.

Newcrest’s Telfer Mine in the Pilbara region of Western Australia. Picture: Will Burgess/Bloomberg News

Originally published as Newmont lobs $32bn ‘final offer’ for gold miner Newcrest