The S&P/ASX 200 Index (ASX: XJO) went up 0.35% to 5,962 points on a mixed day.
Australians can look forward to the federal budget tonight which will be announced at 7:30pm, though we have learned about plenty of details already including personal income tax cuts.
Gold merger
The big news of the day was a merger between Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR).
Northern Star will acquire all of Saracen's shares by paying 0.3763 Northern Star shares for each Saracen share held. Saracen will also pay a special, fully franked dividend of A3.8 cents per share for shareholders.
After the merger, Northern Star shareholders will own 64% of the combined business and Saracen shareholders will own the remaining 36%.
Why are the two ASX 200 gold miners doing this? A key part is that it will bring ownership of KCGM under a single owner. The 'golden mile' will have a single owner for the first time in its more than 125 years of operation.
It will also unlock $1.5 billion to $2 billion of pre-tax synergies with optimisation of processing throughout the broader Kalgoorlie and Yandal regions, and other savings over a ten year period.
The combined business will have a pro forma market capitalisation of $16 billion and A$118 million of net cash. It will have immediate production of 1.6 million ounces per annum, with a path to 2 million ounces per annum.
The company will boast a 'world-class portfolio' with three large scale production centres in Kalgoorlie, Yandal and America.
Northern Star Chair Bill Beament said: "This is a significant value-creating M&A. Our position as joint venture partners at KCGM, the close proximity of the majority of the combined company's assets and a host of other synergies makes this a unique opportunity exclusive to Saracen and Northern Star shareholders."
Saracen managing director Raleigh Finlayson said: "This is one of the most logical and strategic M&A transactions the mining industry has seen. The savings, the synergies and the growth opportunities it will generate make the transaction extremely compelling.
"In short, it is a unique opportunity for Saracen shareholders unlikely to be replicated via any other avenue."
The Saracen share price rose 10% and the Northern Star share price went up 11%.
BHP Group Ltd (ASX: BHP)
Global commodity giant BHP announced today that it is going to acquire another 28% of Shenzi, a six-lease development in the deepwater Gulf of Mexico.
BHP is currently the operator with a 44% interest, Hess Corporation owns 28% and Repsol S.A. owns the other 28%.
Hess and BHP have agreed a price of US$505 million for the 28% stake, which will bring BHP's working interest to 72% and add another 11,000 barrels of oil equivalent per day of production for BHP.
BHP thinks this acquisition is a good counter-cyclical buy and believes there is upside for the oil price with a global slowdown in development activity. The ASX 200 resources giant thinks oil will be attractive for the next decade and likely beyond.
BHP's president of petroleum operations, Geraldine Slattery, said: "This transaction aligns with our plans to enhance our petroleum portfolio by targeted acquisitions in high quality producing deepwater assets and the continued de-risking of our growth options. We are purchasing the stake in Shenzi at an attractive price, it's a tier one asset with optionality, and key to BHP's Gulf of Mexico heartland. As the operator, we have more opportunity to grow Shenzi high-margin barrels and value with an increased working interest."
The BHP share price grew by 0.33% today.
Insurance Australia Group Ltd (ASX: IAG)
The IAG share price dropped 0.3% after announcing the outcome of a class action against it.
IAG has agreed to settle a class action for add-on insurance products sold through motor vehicle and motorcycle dealers.
The settlement involves a gross payment of $138 million and is subject to approval by the Australian federal court.
Inclusive of all related costs and after insurance recoveries, IAG said it's anticipating a net after tax impact from this settlement of less than $50 million. This will be included in the upcoming FY21 half-year report.
