Northern Star Resources (ASX: NST) announced that its board has rejected an unsolicited takeover proposal from South African gold miner Gold Fields (JSE: GFI). The company said the offer was “highly opportunistic” and undervalued.
Chairman Michael Chaney said the board values Northern Star’s operations well above what Gold Fields offered. He called the assets “one of the world’s premier gold portfolios,” said the price fell “well short” of that value, and described the timing as “a highly opportunistic time.”
Gold Fields approached Northern Star, Australia’s top gold producer, on September 14 with an offer of 0.3125 of a Gold Fields share plus A$7.25 cash for every Northern Star share — worth A$27.00 apiece at the time, or roughly A$38.7 billion (US$27.1 billion) in total.
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About 73% of that package was in Gold Fields stock, so its value has moved with Gold Fields’ own share price ever since — and that price has fallen. By last Friday’s close, the same offer was worth only A$25.19 a share, or about A$36.1 billion, shrinking the premium over Northern Star’s stock from 22% to 14%, well below the roughly 30% premium Australian takeovers typically need to succeed.
Chaney also said trading into so much Gold Fields stock would leave shareholders with a “meaningfully higher jurisdictional risk profile” than they face now, and called Gold Fields’ exclusivity demands unreasonable. The board argued the price ignored Northern Star’s near-term growth, including the Fimiston Mill expansion underway at Kalgoorlie Consolidated Gold Mines — the Super Pit, Australia’s largest gold mine.
Gold Fields called the rejection disappointing but isn’t walking away. CEO Mike Fraser said the company wants to keep talking, calling the door open for “constructive dialogue.” If successful, the bid would create the world’s second-largest gold miner, next to Newmont Corp (NYSE: NEM; ASX: NEM).
The Australian miner was already overhauling its leadership when Gold Fields’ offer came in. Activist investor Elliott Investment Management disclosed a stake worth more than A$1 billion in June and pushed for a new CEO, a refreshed board and a review of options including a sale. Some of that was already in motion: Stuart Tonkin, Northern Star’s CEO for 13 years, had announced his departure that May, and former Glencore executive Suresh Vadnagra takes over October 5 — in line with the timeline Elliott had demanded. Chaney is also due to hand the chair to Michael Ashforth after November’s annual meeting.
Read: Elliott Takes A$1B Stake In Northern Star, Pushes For Strategic Review And Sale
Northern Star shares opened as much as 11% higher Monday at A$24.46, though the gain narrowed to about 8.3% by the time they settled at A$23.95 — still short of the offer’s reduced value.
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