Northern Star Resources has rejected an unsolicited A$38.7 billion (US$27.1 billion) takeover proposal from South Africa-based Gold Fields that could have created the world’s second-largest gold producer, according to Reuters. The proposal represents one of the latest major consolidation efforts in the global gold mining industry.
Under the proposed transaction, Northern Star shareholders would have received 0.3125 newly issued Gold Fields shares plus A$7.25 in cash for each Northern Star share. Gold Fields submitted the proposal on September 14, when it represented a value of approximately A$27 per Northern Star share.
Based on Gold Fields’ subsequent share price, the implied value of the offer had fallen to approximately A$25.19 per share, representing a roughly 14% premium to Northern Star’s latest closing price. Northern Star concluded that the proposal materially undervalued the company and its portfolio of long-life gold assets.
The combined company would produce about 4.1 million ounces of gold annually, with roughly 80% coming from Australia, North America, and Chile. Gold Fields estimated that the combination could generate between $4 billion and $5 billion in corporate, operational, and portfolio optimization synergies.
Northern Star shareholders would own approximately 33% of the combined company, which Gold Fields planned to establish with a secondary listing on the Australian Securities Exchange.
Both companies have significant operations in Western Australia. Northern Star operates the Fimiston Open Pit, commonly known as the Super Pit, near Kalgoorlie, one of Australia’s largest gold mines. Gold Fields has also expanded its presence in Australia, including through its A$3.7 billion acquisition of Gold Road Resources.
Northern Star said the Gold Fields proposal would expose its shareholders to a greater proportion of Gold Fields stock and what the company views as a higher jurisdictional risk profile. Northern Star also said the timing of the proposal came before several potential growth catalysts, including the continued ramp-up of the Fimiston Mill.
The approach comes amid increased investor attention on Northern Star. Activist investor Elliott Investment Management, which owns approximately 6.2% of the company, has pushed Northern Star to conduct a strategic review and previously identified a potential sale as one possible way to create shareholder value.
Gold Fields indicated that it remains interested in engaging with Northern Star’s board. Northern Star shares closed 6.2% higher at A$23.47 following disclosure of the proposal, while Gold Fields shares declined more than 14% during trading.
