Merger of US and Australian gold miners held up by £14bn price wrangle
>
Gold merger delayed by price wrangling: Analysts doubt £14bn deal between US and Australian mining rivals
Two of the world’s largest prospectors are planning a multi-billion dollar merger.
The deal between Colorado-based Newmont Corp and Australian rival Newcrest will be the largest corporate deal to date this year.
But the partnership has sparked controversy, with some analysts and investors questioning the price tag.
Mining fusion: pure gold ore found in an Australian mine. Colorado-based Newmont Corp and Australian rival Newcrest are discussing an all-share deal that values the latter at around £14 billion
Newmont, the world’s largest gold miner by production, and Newcrest are discussing an all-share deal that values the latter at around £14 billion.
The offer for Newcrest investors is 0.38 Newmont shares for each share they hold in the company, implying a 21 percent premium over the stock price the day before the deal was announced.
It would be the largest merger deal to date this year, reuniting the two companies.
Melbourne-based Newcrest was founded in the 1960s as Newmont’s Australian company before being spun off in 1990.
But the partnership would require approval from Australian regulators, as four of the country’s five largest gold mines would come under the control of one company.
The mining industry is facing rising costs, which has prompted many companies to consider mergers to increase their capabilities.
But some of Newcrest’s largest shareholders have questioned the value of the deal, as rising interest rates around the world are expected to drive up gold prices, meaning the company risks being taken over cheaply.
Simon Mawhinney, chief investment officer at investment manager Allan Gray, Newcrest’s largest shareholder, said: “A good litmus test for a reasonably priced deal is one where both seller and buyer feel somewhat disadvantaged by underselling or by to pay too much.
“It’s not clear to me that this kind of symmetry exists with these deal terms.”
Meanwhile, Morningstar analyst Jon Mills said if a deal were to be struck it would probably have to be “at a higher price” than Newmont’s £14bn on the table.
He added that “other big prospectors” could be interested in Newcrest, meaning it could become the center of a bidding war as Canada-based giants Barrick Gold and Agnico Eagle are also looking for competitors.
There is also speculation that Newmont’s attack on Newcrest was timed to take advantage of a leadership vacuum at the top of the company after its CEO, Sandeep Biswas, stepped down in December.