Market Updates
Newcrest Mining Offers A$9.5 B for Lihir
Chandrasekhar Atreya
04 May, 2010
New York City
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Newcrest Mining Limited revised its offer for Papua New Guinea based Lihir Gold Ltd that values the miner at A$9.5 billion. The final offer is 41% premium from the date of first offer price. The merged company will be the fifth largest gold miner in the world.
[R]4:00 PM Sydney, Australia – Newcrest Mining Limited revised its offer for Papua New Guinea based Lihir Gold Ltd that values the miner at A$9.5 billion. The final offer is 41% premium from the date of first offer price. The merged company will be the fifth largest gold miner in the world.[/R]
Newcrest Mining Ltd has entered into merger agreement today with Papua New Guinea-based Lihir Gold Ltd to acquire all of Lihir ordinary shares for cash and stock purchase valued at A$9.5 billion that would create the world’s fifth biggest producer of gold.
The combined group will have sales of A$3.9 billion and production of 2.8 million ounces of gold a year, based on 2009 production levels and world’s fourth-largest gold equivalent reserves. Gold production is expected to increase to 3.75 million ounces by 2014.
The merged entity will have 10 mines in five countries, with six or seven separate gold regions with flexibility and options for expansion. The takeover aims to deliver pretax cost savings of A$85 million a year Newcrest CEO Ian Smith said.
Newcrest is offering one of its shares for every 8.43 Lihir shares plus 22.5 cents, less any first-half dividend, the companies said in a joint statement. That compares with the earlier offer of one Newcrest share for every 9 Lihir shares held plus 22.5 cents.
Newcrest’s first proposal consisted of exchange of one share for every 9.5 Lihir shares on Feb 12.
The current offer is at a 40.8% premium to LGL closing share price on February 12 when Newcrest made its initial offer
Directors of LGL have since unanimously recommended shareholders to vote in favor of the deal since it provides them “greater flexibility in the offer consideration.”
LGL Chairman Ross Garnaut said “the LGL board had recognized from the outset the highly complementary nature of Newcrest and LGL, and the strong strategic logic in combining the two organizations.”
Lihir however has secured a right to remain in talks until June 8 to look at other offers.
Lihir chairman Ross Garnaut said an independent expert’s report on the value of the merger by Grant Samuel would take into account the Rudd Government’s plans to implement a resources rent tax.
Smith said initial studies by Newcrest had shown the government’s proposal, which he called a “worst case scenario” could strip 5% from Newcrest’s value on the company.
Newcrest is advised by Lazard Ltd. and Merrill Lynch, a Bank of America Corp. unit. Lihir is advised by Macquarie and Australian Boutique firm Caliburn Ltd.
Lihir shares rose 4.1% to A$3.82 trading 2% below the value of Newcrest offer while Newcrest shares fell by 4% to A$30.79.
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