The world’s largest gold miner Newmont has raised its offer for Australian rival Newcrest to $19.5bn as it bids to complete one of the largest takeovers of an Australian company and create a global powerhouse for the precious metal.
Newmont first approached the Australian miner, which Newmont founded in the 1960s but demerged 30 years ago, in January. Its all-share bid in February valued the company at almost $17bn but was rejected by Newcrest’s board.
The bid represented the start of a major consolidation wave in the global commodities sector, which has included BHP’s move on smaller rival OZ Minerals and Glencore’s unsolicited bid for Canada’s Teck Resources.
Some of the most obvious potential bidders for Newcrest quickly ruled themselves out of a bidding war, and its US suitor, which intends to maintain a listing on the Australian stock exchange if it succeeds, has improved the terms of its indicative offer to tempt its target into opening its books on an exclusive basis.
The new bid — labelled best and final by Newmont and 16 per cent higher than its previous offer — will see Newcrest shareholders control 31 per cent of the company. Newcrest said on Tuesday it would give access to its books to allow due diligence work.
Newmont, already the world’s largest gold producer, would boost its exposure to valuable copper resources through the deal. Bulking up would also help the company increase its exposure to passive investment funds.
Investors that baulked at the original offer suggested the improved terms would be enough to secure their support.
Simon Mawhinney, managing director of Newcrest’s largest shareholder Allan Gray, told the Financial Times that Newcrest remained undervalued based on the potential of its mining assets, but the improved bid “struck a balance” for a reasonable deal. He said he would back it if it was formally agreed — unless a higher offer emerged from a rival — as he would be able to maintain his exposure to Newcrest’s growth opportunity.
Newcrest shares rose 5 per cent to A$29.74, trailing the new offer price which values the Australian company at more than A$32 a share.
Analysts said the new offer was enough to get the deal over the line, with Australian investors set to benefit from exposure to a larger, more diversified asset base. Regulators may still have a say, with four of Australia’s five largest gold mines set to be owned by the US company.
Newmont’s chief executive Tom Palmer said the mining sector was entering a “new era” where sustainability and long-term value creation would be held to a higher standard. “This transaction would strengthen our position as the world’s leading gold company by joining two of the sector’s top senior gold producers and setting the new standard in safe, profitable and responsible mining,” he said in a statement.
A deal would be the latest in a series of megadeals on the Australian market including the sale of Sydney Airport, payment company Block’s takeover of Afterpay and the merger of BHP’s oil and gas operations with Woodside.