In a major announcement, Newcrest Mining (ASX:NCM) confirmed it has approved a monumental takeover offer from Newmont (NYSE:NEM), a deal estimated to be worth A$28.8 billion ($19.2 billion). This colossal business merger is expected to create the world’s premier gold mining enterprise.
The deal is structured such that Newcrest shareholders will acquire 0.4 shares of Newmont for each Newcrest share they hold. This arrangement allows them to secure 31% ownership in the resultant merged entity, a fact affirmed by the Melbourne-based firm, following a Bloomberg News report from Sunday.
The agreement culminates in an inferred enterprise value for Newcrest of A$28.8 billion, incorporating the net debt. Furthermore, Newcrest is committed to disbursing a franked special pre-completion dividend, reaching up to $1.10 per share. Preceding this agreement, Newcrest had consented to extend Newmont’s due-diligence rights to May 18, post the expiry of an earlier deadline.
Newcrest’s chairman, Peter Tomsett, lauded the transaction, stating, “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.”
The expanded Newmont will possess gold assets spread across the globe from North and South America to Africa, Australia, and Papua New Guinea. The merger also signifies an expanded interest in copper, a critical metal in the clean energy transition.
This transaction could potentially represent the zenith of a rapid five-year consolidation amongst the world’s top gold miners, a trend that took off with Barrick Gold Corp’s $18 billion acquisition of Randgold Resources Ltd. and includes the recent $5.2 billion takeover of Yamana Gold Inc. in March. The announcement of Newmont’s proposal coincides with a time when the spot trading price of bullion is nearing a historic peak, amidst global stagflation concerns.
Newmont initially proposed a $17 billion non-binding bid to its Australian counterpart in February, which was turned down by Newcrest’s board. In April, the US company increased the offer to $19.5 billion, terming it as the best and final offer. Sherry Duhe, Newcrest’s chief executive officer, has stated that the board was ready to endorse the proposal to its shareholders, contingent upon successful due diligence.
The global gold mining industry is grappling with the prospects of stagnant production, increasingly challenging mining deposits, and escalating input costs. These industry hurdles are thought to be a driving force for more mergers and acquisitions, as firms strive for expansion to escalate production and gain efficiencies through economies of scale.
Newcrest’s allure for Newmont extends beyond its five gold mines spanning three continents, as the Australian company generates approximately one-fourth of its revenue from copper. Newmont, currently facing a decade-long slump in gold, has expressed a desire to diversify, aiming for more of the energy-transition metal in its portfolio.