GOLD Fields confirmed today it had a proposal of a A$38.7bn ($27bn) shares and cash takeover of Northern Star Resources rejected by the Australian company but that it intends 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 a 1.5 million ounce a year Australian-listed gold miner which has had a difficult year restating production and changing management. Ryan Gurner is the firm’s interim CEO following the departure of Stuart Tonkin on August 28. Suresh Vadnagra will officially step into the permanent role at Northern Star on October 5.
Gold Fields said it proposed a 22% premium to Northern Star’s closing share price on September 11 which is equal to A$27 per share or a total value of A$38.7bn. The offer comprises a large segment of shares.
“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 A$7.25 in cash and 0.3125 in Gold Fields shares. However, the twist in the offer is that Northern Star shareholders are being offered a mix-and-match of the two. That means that Gold Fields will cap how much cash it pays out in total to Northern Star up to a maximum of A$10.4bn in cash and, similarly up to a maximum of 447 million new shares in total. As the preference may be for cash, this will mean all shareholders may have to settle for some shares.
If completed, Northern Star shareholders will own 33% of the enlarged group. Gold Fields would also take a secondary listing on the ASX.
Gold Fields has operations in South Africa (South Deep) and Ghana where it is currently waiting on the government for a renewal of the mining licence for the Tarkwa mine which expires in April. But in its statement today it said the combined group – the world’s second largest gold producer with output of 4.1 million oz a year – would derive 80% of production from Australia, North America and Chile.
Shares in Northern Star initially leapt 9% on the Australian Securities Exchange but have since partially retraced to a 6% gain.
Northern Star has activist investor Elliott Asset Management in its ranks (6.24%). According to the Australian Financial Review, Elliott wants Northern Star to start talks with Gold Fields which described its offer as “compelling”.
The Sandton-headquartered group said a combination established a significant land position in Australia and $4bn to $5bn in synergies across the combined group. It also expected to release non-core assets worth $4bn. The combined group would have a growth pipeline of about 800,000 oz of gold, said Gold Fields.
