Newmont Corp makes a $16.9 billion offer for Newcrest amid leadership change
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One of the largest gold producers globally, Newmont Corp, has unveiled a $16.9 billion offer for Newcrest Mining Ltd, another gold mining firm based in Australia. However, investors and analysts are concerned that the offer price is too low, with Newmont Corp undervaluing the target amid a recent change in leadership.
Newmont makes a $16.9 billion offer in Newcrest
Newcrest is currently looking for a change in its top leadership after the resignation of the former Chief Executive Sandeep Biswap in December last year. Moreover, the company also wants to be ready for the changes in interest rates this year. Interest rates are expected to peak this year before dropping, which creates a bullish outlook for gold prices.
Newcrest has said that it is considering the all-share proposal. The Australian gold miner filed a response to media speculation regarding the proposal made by Newmont. However, the shareholders are not pleased with the offer price.
Newcrest investors reject offer price
The Chief Investment Officer at Allan Gray, the largest shareholder at Newcrest, opined that the $16.9 billion offer tabled by Newmont was not suitable for the two companies, as it was too low.
“A good litmus test for a reasonably-priced deal is one where both seller and buyer feel somewhat aggrieved by selling out too low or by paying too much. It’s not clear to me that this kind of symmetry exists with these deal terms,” Gray said.
The shares of Newcrest have reported notable gains, as they are up by as high as 14.4% and trading at levels last seen in May last year. However, the share price remains below Newmont’s current offer price of $27.16, indicating that the market was not swayed by the deal and is pessimistic about the offer being accepted.
Newmont is the largest gold producer globally by market capitalization. While describing its offer, the company said that it was “a powerful value proposition.” On the other hand, Newcrest is also a major player in the precious metal industry. Some of the operations supported by the company include a top-class Cadia asset in Australia. The company is also expanding its presence in North America and Papua New Guinea.
The proposal tabled by Newmont also includes other terms that need to be approved by the Newcrest board. The deal will also undergo due diligence and gain approval from the relevant regulatory bodies. Shareholders would also be required to vote in a process that will take months to be finalized.
The offer price is a 2% premium on Newcrest’s last closing value of $22.45. However, analysts place the offer price below the traditional 30% takeover premium, with Newcrest having a valuation of around $31 per share.
If this deal pans out, Newcrest shareholders will receive 0.380 shares in Newmont for each share they hold at Newcrest. Newcrest shareholders will get a 30% stake in Newmont. While investors believe the Newmont offer is low, Newcrest revealed it was 4.7% higher than the previous 0.363 per share offer it had previously rejected.
