Newcrest share price jumps 14% on takeover approach

This gold giant is in the crosshairs of an even bigger gold miner from North America…

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Key points

  • Newcrest has received a takeover proposal
  • US mining giant Newmont has tabled an improved all-scrip offer after its first was rejected 
  • If a deal is done, Newmont is expected to list CDIs on the ASX

The Newcrest Mining Limited (ASX: NCM) share price is on the move on Monday morning.

At the time of writing, the gold miner's shares are up 14% to $25.68.

This latest gain means that the Newcrest share price is now up 24% since the start of the year, as you can see below.

Why is the Newcrest share price rising?

The Newcrest share price is rising today after news of a takeover approach offset a pullback in the gold price on Friday night.

According to the release, after rejecting an earlier offer, Newmont returned on Sunday with an improved conditional and non-binding indicative proposal to acquire Newcrest for 0.380 Newmont shares for each Newcrest share.

Based on the current Newmont share price of US$49.85 and current exchange rates, this equates to an offer of $27.40 per share. This is a 22% premium to the Newcrest share price at Friday's close.

Newmont's previous offer, which was swiftly rejected, was for 0.363 shares per Newcrest share, which equates to an offer of $26.15 per share. The company explained the rejection:

The Newcrest Board had considered that the earlier proposal from Newmont would not deliver sufficiently compelling value to Newcrest shareholders and on that basis, rejected the earlier proposal.

Is this offer enough to get a deal done?

This offer appears to be in the region of what Newcrest is looking for. As a result, it hasn't rejected the offer this time around.

However, it also hasn't accepted it as of yet. Together with its financial and legal advisers, the Newcrest board is currently considering the indicative proposal.

It notes that it remains subject to a number of conditions, including granting of exclusivity to Newmont, due diligence, Newmont shareholder approval, and various regulatory approvals.

It also contemplates the establishment of a chess depositary interest (CDI) listing on the ASX for new Newmont shares that would be issued to Newcrest shareholders.

For now, the Newcrest board has told shareholders that they need not take any action in relation to the proposal.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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