Australia’s Newcrest Mining’s board has unanimously backed a A$29 billion ($19 billion) takeover bid by its U.S. rival Newmont, paving the way for the world’s largest gold miner to tighten its grip on the industry.
Subject to a shareholder vote and regulatory approval, Newmont will acquire Newcrest – which was originally founded in the 1960s and later spun off through a merger with BHP Billiton – for 0.4 shares in the Australian business.
The deal would bolster Denver-based Newmont’s operations in Australia, Canada and Papua New Guinea and could have knock-on effects in the industry as smaller mines owned by the combined company would be divested.
It is the latest example of consolidation in the global mining industry as companies look to acquire promising businesses to gain scale and access to key minerals needed for the energy transition. Newmont’s move significantly increases its exposure to copper and comes on the heels of BHP’s acquisition of rival Oz Minerals, Rio Tinto’s acquisition of Turquoise Hill and Allkem’s merger with Livent to create a stronger lithium mining business.
Newmont first approached Newcrest in February with an all-share offer, which was rejected. It raised its bid to A$29.4 billion in April, which led Newcrest’s board to open its books.
The slightly lower value of the deal, which includes debt, reflects a decline in Newmont’s stock price over the past two months, but still represents a more than 30% premium to levels prior to the initial offer.
Tom Palmer, chief executive of US-listed Newmont, an Australian from the mining town of Broken Hill, said the takeover represented “remarkable” for shareholders. the value of”. “It creates an industry-leading portfolio with decades-long gold and copper production profiles in the world’s most favorable mining jurisdictions,” he said.
ANZ said the deal came against a backdrop of gold prices rising to near record highs as banking troubles, a dovish Federal Reserve and uncertainty over the U.S. debt ceiling boosted bullion’s safe-haven status.
Morgan Stanley analyst Rahul Anand said in a note: “We believe that if the deal is approved, there will be operational synergies in terms of project sequencing and growth optionality, and the combined entity will increase its exposure to low-risk assets. Diversification of business across jurisdictions.”
Palmer said due diligence found that the company expects to realize $500 million in synergies within two years of closing, with an opportunity to increase cash flow by $2 billion during that time.
As part of the acquisition agreement, Newcrest will pay a final dividend to shareholders. The combined business will retain a secondary listing on the ASX.