Newcrest Takes Newmont’s “Best And Final” $19.2 Billion Acquisition Bid

Australian gold miner Newcrest Mining (TSX: NCM) said on Monday it would back Newmont Corp’s (NYSE: NEM) takeover offer in one of the world’s largest buyouts so far this year. The two mining giants entered into a binding scheme implementation deed that pegged Newcrest at an enterprise value of A$28.8 billion ($19.2 billion), solidifying Newmont’s position as the world’s largest bullion producer with mines in the Americas, Africa, Australia, and Papua New Guinea.

Newcrest shareholders would receive 0.400 Newmont share for each share held, with an implied value of A$29.27 per share, a greater exchange ratio than the 0.380 rejected by Newcrest’s board in February. This gives Newcrest shareholders 31% ownership of the combined group. 

The deal is Newmont’s third attempt to buy out Newcrest, after its first two bids were rejected by the Australian miner.

After the first two rejected proposals, the Australian miner said that it would give Newmont access to the company’s “limited, non-public information on a non-exclusive basis” so that it can provide an improved proposal “that appropriately reflects the value of Newcrest.”

After making its “best and final” offer, Newmont saw its bid viable after Newcrest entered into an exclusivity deed related to the proposed acquisition.

The transaction, which has been unanimously authorized by Newcrest’s board but is still subject to regulatory approval, is the largest in the gold mining sector to date, exceeding Newmont’s acquisition of rival Goldcorp Inc. in 2019. Newcrest, whose then-CEO abruptly resigned at the end of last year, rejected the initial approaches, though it had indicated earlier this month that it planned to endorse an improved buyout offer from its suitor.

The transaction, which is subject to approval by both companies’ shareholders, would nearly double Newmont’s gold output and vault the miner past Freeport McMoRan to become the largest U.S. gold and copper producer by market capitalisation.

Newmont’s acquisition increases its exposure to gold at a time when the metal is nearing a record high, and it will also significantly increase its copper resources – a metal where demand is predicted to surpass supply as the move away from fossil fuels accelerates.

On the implementation of the arrangement that distributes tax credits to Australian shareholders, Newmont will also allow Newcrest to pay a franked special dividend of up to $1.10 per share.

“This transaction will combine two of the world’s leading gold producers, bringing forward significant value to Newcrest shareholders through the recognition of our outstanding growth pipeline,” said Newcrest Chairman Peter Tomsett.

Newmont stated that once the purchase was completed, it would have around 8 million ounces of total combined annual gold production, with more than 5 million gold ounces coming from 10 long-life and low-cost mines.

The Denver-based miner noted that the aggregate annual copper production from Australia and Canada would be around 350 million pounds.

Newcrest advised its shareholders to vote in favor of the merger at a meeting scheduled for September or October. The firms stated that the transaction would be completed in the fourth quarter of 2023.

Information for this briefing was found via Reuters, Bloomberg, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.