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Gold miner Newmont raised its takeover bid for Newcrest to $19.5bn

The world’s largest gold miner Newmont has increased its takeover offer for its Australian rival Newcrest to $19.5bn, marking Newmont’s best and final offer. This follows their original $17bn bid back in February, which was turned down by Newcrest’s board. Newcrest would give Newmont access to its book after the improved all-share bid that has received some support from shareholders.

The acquisition would boost Newmont’s exposure to valuable copper resources. The upscale would subsequently help the company gain access to more passive investment funds. According to Simon Mawhinney, the managing director of Allan Gray, which is Newcrest's biggest shareholder, the mining company is still undervalued given the potential of its mining assets. However, he believes that the improved bid strikes a reasonable balance for a fair deal, and he would support it if it were formally agreed upon, unless a competitor presents a higher offer. This way, he can continue to benefit from Newcrest's growth potential.

The improved offer was 16% higher than the initial proposal, and represents around a 46% premium to Newcrest’s share price on February 3, and values its shares at $32.87. Additionally, Newmont is proposing a franked special dividend of up to $1.10 per share, and they are requesting the board's unanimous approval to move forward with the binding offer following a due diligence period of approximately four weeks. The dividend payment would enable Newcrest to utilise its remaining franking credits, which is a tax benefit exclusive to shareholders who are Australian residents for tax purposes, before being acquired by Newmont, which is listed on the New York stock exchange.

If the agreement is reached, it would be the most recent addition to a sequence of large-scale transactions in the Australian market, such as the sale of Sydney Airport, the acquisition of Afterpay by payment company Block, and the merger of BHP's oil and gas operations with Woodside. After the announcement, Newcrest shares closed 5.16% higher at A$29.74. Meanwhile, Newmont’s US-listed shares were down 1.72% in premarket trading, which analysts believe indicates some uncertainty over whether the deal would go through.

Written by: Quynh Chi Le

Sources: Financial Times, Reuters, Financial Review

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