Gold merger stalled by price row: Analysts question £14bn deal between US and Australian mining rivals
Two of the world’s largest gold mining companies are planning a multi-billion dollar merger.
The deal between Colorado-based Newmont Corp and Australian rival Newcrest is shaping up to be the biggest corporate deal so far this year.
But the tie-up has sparked controversy with some analysts and investors questioning the price.
Mining Smelter: Pure gold ore found in an Australian mine. Colorado-based Newmont Corp and Australian rival Newcrest are discussing an all-stock deal that values the latter at around £14bn
Newmont, the world’s largest gold producer by production, and Newcrest are discussing an equity deal that values the latter at around £14bn.
The offer for Newcrest investors is 0.38 Newmont share for each share they hold in the company, implying a premium of 21% to the share price the day before the announcement of the announcement. ‘OK.
It would be the biggest merger deal so far this year and bring the two companies together.
Melbourne-based Newcrest was established in the 1960s as an Australian business of Newmont, before being spun off in 1990.
But the combination would require approval from Australian regulators because it would place four of the country’s five largest gold mines under the control of a single company.
The mining sector is facing rising costs, which has prompted many companies to consider mergers to boost their capabilities.
But some of Newcrest’s major 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 cheap recovery.
Simon Mawhinney, chief investment officer at Allan Gray, Newcrest’s largest shareholder, said: ‘A good litmus test for a reasonably priced deal is where both seller and buyer feel somewhat aggrieved by selling too low or paying too much.
“It is not clear to me that this type of symmetry exists with these conditions of agreement.”
Meanwhile, Morningstar analyst Jon Mills said if a deal were to go through it would likely have to be “at a higher price” than the £14bn on Newmont’s table.
He added that “other major gold mining companies” could be interested in Newcrest, meaning it could become the center of a bidding war, with Canadian giants Barrick Gold and Agnico Eagle also looking to bid. attract competitors.
There is also speculation that Newmont’s raid on Newcrest was timed to exploit a leadership vacuum at the top of the company following the resignation of its chief executive, Sandeep Biswas, in December.