Northern Star Resources shares jumped more than 9% after Australia's largest gold miner rejected a $27 billion takeover proposal from South Africa's Gold Fields, calling it materially undervalued and opportunistic. Elliott Management, the hedge fund that pushed Northern Star toward a sale, is now urging the board to reopen talks.
Northern Star Resources shares jumped more than 9% Monday after the Australian miner rejected a $27 billion takeover proposal from Gold Fields, saying the offer undervalued the company. Northern Star is Australia's largest gold producer by market value.
The rejected offer
Gold Fields proposed acquiring all of Northern Star through 0.3125 of its own shares plus A$7.25 in cash for every Northern Star share. The proposal, received Sept. 14, initially valued Northern Star at A$38.7 billion ($27.15 billion), a 22% premium to its Sept. 11 closing price. By Friday, Sept. 25, the implied value had slipped to A$36.1 billion as Gold Fields' own share price moved.
Board pushes back
Northern Star's board unanimously rejected the proposal, saying it materially undervalued the company. According to CNBC, Chairman Michael Chaney said Gold Fields sought the assets "at a highly opportunistic time". The board also flagged that most of the payment would arrive in Gold Fields stock rather than cash, and that the offer carried several conditions.
Monday's rally still left Northern Star short of the deal's implied price: shares closed around A$23.47, trailing the implied A$27-a-share value of the rejected offer.
Elliott calls for engagement
The push for a deal traces back to Elliott Management, a US hedge fund. Elliott called on Northern Star to explore a sale in June following a run of profit warnings. Elliott partner John Pike urged the board to hold fresh talks with Gold Fields, arguing there is immense potential for value creation at Northern Star.
Gold Fields, in turn, pointed to potential synergies of up to $5 billion and at least $4 billion of asset disposals across a combined group. A tie-up would create the world's second-largest gold producer behind Newmont, with annual Australian output of 2.4 million ounces.
Sources: CNBC, Financial Times
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