Johannesburg – South African gold producer Gold Fields has had a takeover proposal worth about A$38.7 billion (US$27.1 billion) rejected by Australia’s largest gold miner, Northern Star Resources.
The approach, first reported by Billionaires.Africa, was made on 14 September as Gold Fields sought to expand its Australian operations.
Northern Star confirmed the offer on Monday, saying it had unanimously rejected the proposal and would not engage further with Gold Fields.
According to Reuters, the proposal valued Northern Star at A$38.7 billion based on Gold Fields’ share price when the offer was made.
Under the proposed deal, Northern Star shareholders would have received A$7.25 in cash and 0.3125 new Gold Fields shares for each Northern Star share. The offer represented a 22% premium to Northern Star’s 11 September closing price.
However, Northern Star chairman Michael Chaney said the proposal significantly undervalued the Australian miner.
“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, according to Australian Mining.
Northern Star also objected to the structure of the offer, with about 73% of the proposed consideration coming in Gold Fields 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 Northern Star’s existing exposure, Chaney said.
Gold sector consolidation
The proposed takeover comes amid increased consolidation in the global gold industry as companies seek to expand their production and take advantage of elevated gold prices.
Gold Fields already has a significant Australian presence, while several of its Western Australian operations are located near Northern Star’s assets.
Moneyweb reported that Northern Star had a market value of about A$31.5 billion (US$22.1 billion) before the offer became public. Gold Fields had a market value of roughly US$35.7 billion at the time.
Northern Star said the offer was poorly timed because of several expected developments, including the commissioning and ramp-up of its Fimiston Mill at the Kalgoorlie Consolidated Gold Mines operation and the appointment of incoming chief executive Suresh Vadnagra.
The company has also been under pressure from activist investor Elliott Investment Management, which took a more than A$1 billion stake in June and called for a strategic review.
Despite the rejection, Gold Fields has not indicated that its interest in Northern Star has ended. The South African miner was still considering its options after the initial rejection, Business Insider Africa reported.
The proposed transaction would have combined two major gold producers and significantly expanded Gold Fields’ exposure to Australia’s gold industry.
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Compiled by Betha Madhomu
