REDWHEEL, a UK investment firm, has urged Gold Fields to drop its $23.6bn cash-and-paper takeover proposal for Northern Star Resources, Australia’s largest gold miner, arguing that the offer is dilutive and comes at a time of weakness.
In an open letter to Gold Fields, Redwheel said Gold Fields was putting its concerns about medium-term gold production ahead of shareholders’ interests.
After attempting to hold discussions with Northern Star for six months, Gold Fields went hostile in September, issuing a public an offer of A$7.25 in cash and 0.3125 Gold Fields shares for each Northern Star share. This was equivalent to A$27 per share, or A$38.7bn in total, a 22% premium to Northern Star’s closing share price at the time.
However, a 17% fall in Gold Fields’ share price has since cut the value of the offer by about 12%, to roughly A$23.70 a share.
Redwheel said the bid for Northern Star came at a time when Gold Fields was uncertain whether it would be granted a new mining licence for Tarkwa, its Ghanaian mine, and when an environmental permit for Windfall, its Canadian project, would be issued.
“We believe that a resolution around Ghana’s future operations, together with greater clarity on Windfall’s development, could materially strengthen Gold Fields’ strategic and financial position and support a recovery in its relative valuation,” Redwheel’s Emerging and Frontier Market Investment team said in the letter.
“We are therefore not supportive of using equity at this point in the cycle to fund a transaction that would transfer a substantial portion of that potential re-rating to new shareholders.
“Our principal concern is that the transaction would require Gold Fields shareholders to surrender a material proportion of the company’s future upside before the value of the existing portfolio has been properly recognised,” it said.
It also expressed concern that the transaction’s value rested partly on recouping cash through non-core asset sales, especially as these assets had not been identified.
Redwheel has publicly opposed Gold Fields’ dealmaking before. In 2022, it urged the company to focus on the “excellent organic growth options which it already owns” rather than bidding for Yamana Gold, the former Canadian firm. In the end, Gold Fields decided not to enter a bidding war for Yamana. The climb-down, a result of shareholder reluctance to overspend, led to the resignation of Gold Fields’ then CEO, Chris Griffith.
Redwheel’s letter comes as Gold Fields’ current CEO, Mike Fraser, has embarked on a charm offensive aimed at Australian investors in Northern Star, according to a report in the Financial Times on Wednesday.
He told the newspaper that Gold Fields intended to extract up to $5bn in synergies from combining the two companies. “It will be very hard for anyone else to recreate that value,” he said. Fraser also described the process as “early days” but said he was hopeful of a resolution. “I don’t think it’s helpful for any of us to have this dragging along. Bringing this to some form of conclusion in the not-too-distant future makes sense,” he told the FT.