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


Top gold producer Newmont ( NEM ) Corp said it has made a $16.9 billion offer for Australian Peer Newcrest ( NCMGF ) mining to create a global gold behemoth, although investors and analysts say a leadership change is unlikely. It has reduced the target between

Newcrest is looking for a new boss, with previous chief executive Sandeep Biswas stepping down in December, while global interest rates are expected to rise and fall this year, improving the outlook for gold prices. .

The Australian gold miner said it was considering an all-share offer in a filing that was a response to media speculation over the weekend. According to a person familiar with Newcrest’s discussions, initial feedback from shareholders is that they want a higher price.

“A good litmus test for a fair price deal is where both the seller and the buyer feel somewhat unsettled by selling too little or paying too much,” says Simon Moheney, Newcrest’s largest shareholder. , said Alan Gray’s chief investment officer, 7.36. % Part “It is not clear to me that such coordination exists with the terms of these agreements.”

Newcrest shares rose 14.4 percent to A$25.60 ($17.77), the highest since May 2022, but remained below the implied current offer price of $27.16, suggesting investors are not convinced the deal will close. will be done. Shares closed up 9.3% at A$24.53.

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

Newcrest’s operations include its high-grade Kedia asset in Australia, an expanding footprint in North America and Papua New Guinea, and development potential in copper, which is highly valued as a key to the energy transition. BHP ( BBL ) Group made a $6.4 billion offer for Australian copper miner Oz ( OZMLF ) Minerals Minerals in December.

Newmont’s proposal is subject to an agreed scheme of arrangement that must be recommended by Newcrest’s board and is subject to due diligence, various regulatory approvals and a shareholder vote that could take months.

The indicative offer implies a 21% premium over NewCrest’s last closing value of A$22.45, less than the traditional 30% takeover premium, said Morningstar senior analyst Jon Mills, who valued NewCrest at about A is $31 per share.

Newcrest shareholders will receive 0.380 Newmont shares for each Newcrest share, giving them a 30% stake in the expanded miner. NewCrest disclosed on Monday that this is a 4.7% improvement from the previous 0.363 per share offer which NewCrest had already rejected for not providing enough value to shareholders.

If investors don’t back the deal, the board will be under pressure to improve Newcrest’s value, perhaps by spinning off assets such as Haveron and Telfer in Australia, or Leher in Papua New Guinea, said Berenjoy analyst Dan. Morgan said.

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

Sherry Duhe, the former chief financial officer, who joined Newcrest in February last year, is the interim chief executive while a global internal and external search for a replacement continues.

NewCrest has been seen as a target in recent years because of its middling performance, but only a handful of buyers have been enough to scoop it up, said one investment banker who did not speak publicly about the matter. was not authorized to do so.

The banker added that the all-share nature of the offer means the timing is more likely to be tied to a NewCrest leadership risk than a big call on the price of gold, but it is likely a constructive point on the precious metal. Also reflects vision.

Morgan Stanley said in a January 16 note that upside risks to gold are rising, saying its macroeconomists are now forecasting lower rates for the metal and a weaker US dollar.

Morgan Stanley sees spot gold rising to $2,160 an ounce in the fourth quarter from $1,866 an ounce.

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