GOLD Fields confirmed today that Northern Star Resources had rejected its A$38.7bn ($27bn) cash-and-share takeover proposal, but said it intended to press on with its efforts to complete the transaction.
“While we are disappointed that the Northern Star Board has not yet chosen to engage on a proposal … we remain open to constructive dialogue and continue to seek engagement with the Northern Star Board to discuss the merits of the proposed transaction,” said Mike Fraser, CEO of Gold Fields, in an announcement.
Northern Star is an Australian-listed gold miner producing 1.5 million ounces a year. It has had a difficult year of production restatements and management changes. Ryan Gurner is interim CEO following the departure of Stuart Tonkin on August 28. Suresh Vadnagra, formerly of Glencore, is due to take up the permanent role on October 5.
Gold Fields said its proposal of A$27 per share, or A$38.7bn in total, represented a 22% premium to Northern Star’s closing share price on September 11. Most of the offer is in shares, said Northern Star.
“Gold Fields has asked our shareholders to take nearly three-quarters of the consideration in Gold Fields stock, which carries a meaningfully higher jurisdictional risk profile than the exposure they hold today,” said Northern Star chairman Michael Chaney in a statement. Northern Star’s board unanimously rejected the offer.
The offer comprises A$7.25 in cash and 0.3125 Gold Fields shares for each Northern Star share. The twist is a mix-and-match facility: Northern Star shareholders can choose all cash, all shares or the standard mix. However, Gold Fields has capped the total cash it will pay at A$10.4bn and the number of new shares it will issue at 447 million. If shareholders mostly opt for cash, as seems likely, those choosing cash will have their payouts scaled back and topped up with Gold Fields shares.
If the deal goes ahead, Northern Star shareholders will own 33% of the enlarged group, and Gold Fields would take a secondary listing on the ASX.
Gold Fields has operations in South Africa (South Deep) and Ghana, where it is waiting for the government to renew the mining lease for Tarkwa, which expires in April. But in its statement today, it said the combined group would be the world’s second-largest gold producer, with output of 4.1 million oz a year, and would derive 80% of its production from Australia, North America and Chile.
Shares in Northern Star initially leapt 9% on the Australian Securities Exchange but have since pared their gain to 6%.
Activist investor Elliott Investment Management holds 6.24% of Northern Star. According to the Australian Financial Review, Elliott wants Northern Star to open talks with Gold Fields, which has described its offer as “compelling”.
The Sandton-headquartered group said the combination would create a significant land position in Australia and generate $4bn to $5bn in synergies. It also expects to sell non-core assets worth $4bn. The combined group would have a growth pipeline of about 800,000 oz of gold, Gold Fields said.
