Australia’s largest gold producer, Northern Star Resources, has rejected a A$39bn ($27bn) takeover offer from South Africa’s Gold Fields, blocking a proposed combination that would have created the world’s second-largest gold miner.
Northern Star said on Monday that its board had rejected the approach as “opportunistic, unsolicited and conditional”. The Perth-based company’s shares subsequently rose 9 per cent in Sydney, valuing Northern Star at about A$34bn ($23.8bn).
The bid follows growing uncertainty over Northern Star’s future after US hedge fund Elliott Management called in June for the company to put itself up for sale, arguing that its performance had deteriorated. Gold Fields, one of the world’s largest gold producers and already a major operator in Australia, was identified by Elliott as one of the few gold companies large enough to acquire Northern Star.
Gold Fields has approached Northern Star several times in recent months. Bloomberg first reported the latest approach, which was made in recent weeks and rejected by Northern Star on September 15. Gold Fields declined to comment.
The proposed transaction would have created a gold producer second only to Newmont globally. In Australia, the combined group would have become the country’s largest gold miner, producing about 2.4mn ounces annually. Almost 60 per cent of the combined company’s gold would have come from Western Australia.
Gold Fields already owns four of Australia’s largest gold mines, including Gruyere and Granny Smith. Northern Star said the offer, under which 73 per cent of the consideration would have been paid in newly issued Gold Fields shares, “materially undervalues” its assets.
Northern Star’s board also argued that the transaction would expose its shareholders to “jurisdictional and operational risks to which they are not exposed today”, referring to Gold Fields’ Johannesburg listing. Gold Fields has said it intends to establish a Sydney listing to enable Australian investors to trade its shares.
Michael Chaney, Northern Star’s chair, said Gold Fields had sought to acquire a major portfolio at a price below what the board regarded as its fundamental value.
“[Gold Fields] has sought to acquire one of the world’s premier gold portfolios at a price that falls well short of what the board considers to be its fundamental value and at a highly opportunistic time,” Chaney said.
Valuation is expected to be a central issue if the two companies return to negotiations. Ephrem Ravi, an analyst at Citi, said Northern Star and Gold Fields together own six of Australia’s 15 largest gold miners by production. He added that Northern Star was trading at a substantially higher valuation multiple than Gold Fields.
The proposed deal comes amid a period of consolidation in the global gold-mining industry. Newmont’s A$29bn acquisition of Australia’s Newcrest was among the largest mining transactions completed during the past decade.
Gold mining has long been one of Australia’s most significant industries, and the country remains the world’s eighth-largest gold producer. Northern Star and Gold Fields have both pursued acquisitions of smaller producers as organic expansion and the discovery of potentially lucrative new deposits have become increasingly difficult.
For now, Northern Star’s rejection leaves the proposed A$39bn transaction unresolved, with the company maintaining that the offer does not reflect the value of the assets it would bring to a combined group.
