Newmont, the world’s largest gold miner, has raised its bid for Australian rival Newcrest to $19.5 billion, as it seeks to complete one of the largest acquisitions of an Australian company and create a global precious metals powerhouse.
Newmont first approached the Australian mining company, which Newmont had founded in the 1960s but split off 30 years earlier in January. Its full stock offering last February was valued at about $17 billion, but was rejected by Newcrest’s board of directors.
The bid marked the beginning of a major consolidation wave in the global commodities sector, which included BHP’s move on smaller rival OZ Minerals and Glencore’s junk bid for Canada’s Teck Resources.
Some of Newcrest’s more visible potential bidders soon excluded themselves from the bidding war, and her US student, intending to keep a listing on the Australian Stock Exchange if successful, improved the terms of his indicative offer to entice his target. In opening his books on an exclusive basis.
The new bid – which Newmont described as best and last and 16 per cent higher than the previous bid – would see Newcrest shareholders control 31 per cent of the company. Newcrest said on Tuesday it will make its books accessible to allow for due diligence.
Newmont is already the world’s largest gold producer and will boost its exposure to the valuable copper resource through the deal. Increasing the amount of funds would also help the company increase its exposure to passive investment funds.
Investors who baulked at the original offer suggested that improved terms would be enough to secure their support.
Simon Moheny, managing director of Newcrest’s largest shareholder, Alan Gray, told the Financial Times that Newcrest had remained undervalued based on the potential of its mining assets, but that the improved offer “balanced” a reasonable deal. He said he would back it if the agreement was formalized – unless a higher bid came up from a competitor – because he would be able to maintain his exposure to the Newcrest growth opportunity.
Shares of Newcrest rose 5 per cent to A$29.74, missing the new offer price that values the Australian company at more than A$32 a share.
Analysts argued that the new offering was enough to get the deal through, with Australian investors poised to take advantage of exposure to a larger and more diversified asset base. Regulators may still have a say, as the US company is set to own four of Australia’s five largest gold mines.
Newmont CEO Tom Palmer said in a statement that the mining sector is entering a “new era” where sustainability and long-term value creation are taken at a higher level. “This transaction will cement our position as a leading gold company in the world by joining two of the leading gold producers in the sector and setting a new standard in safe, profitable and responsible mining,” he said.
The deal will be the latest in a series of mega deals in 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.
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