Northern Star rejects Gold Fields’ share-heavy takeover proposal
Northern Star rejected a conditional, nonbinding takeover approach from Gold Fields. The initial A$38.7 billion valuation relied heavily on Gold Fields shares, whose decline reduced the offer’s implied value. Northern Star’s board argues that the proposal undervalues its mines and would expose its shareholders to a different set of risks. No merger agreement was signed, and the proposal has not become a completed transaction.
Economics & Markets··Evening
The first valuation was A$38.7 billion
Australian gold producer Northern Star Resources said it rejected Gold Fields’ proposal to buy all its shares. Reuters also reported the September 28 rejection and the initial A$38.7 billion implied value of the approach. Northern Star received the conditional, nonbinding proposal on September 14. It offered 0.3125 new Gold Fields shares and A$7.25 in cash for every Northern Star share, producing an initial implied price of A$27 per share. That was not a merger price agreed by both companies; it was a calculation using Gold Fields’ share price at the time. Further examination and regulatory approvals would have been required before a transaction could proceed.[1], [2]
A fall in Gold Fields stock lowered the implied price
Most of the proposed payment was Gold Fields stock rather than cash. Northern Star calculated that shares made up about 73 percent of the original consideration and cash about 27 percent. A subsequent fall in Gold Fields stock lowered the implied price for each Northern Star share from A$27 to A$25.19 and the total value from A$38.7 billion to A$36.1 billion. Reuters also reported the decline in the per-share price. The revised calculation represented a 14 percent premium to Northern Star’s latest close; the original proposal represented a 22 percent premium against the comparable earlier price. The shifting share component meant that the consideration was not a fixed cash amount. If completed, Northern Star holders would have owned about 33 percent of the combined company.[1], [2]
The board objected to valuation and share exposure
Northern Star’s board argued that the proposal undervalued its mines and rejected it unanimously. It also said payment weighted toward Gold Fields shares would expose its investors to different jurisdictions and operating risks. The board objected to the timing, before output at its Fimiston mill had ramped up and incoming chief executive Suresh Vadnagra had taken office. Northern Star told Gold Fields on September 25 that further talks were inappropriate. Reuters reports that Gold Fields considers the proposal beneficial to both shareholder groups and remains open to dialogue. The companies have different assessments of value, and the approach did not become a binding merger agreement. Conditions also included an exclusivity request, due diligence and required approvals.[1], [2]
