Investors with shares in gold miner Newcrest Mining Ltd (ASX: NCM) had broad smiles on their faces this week after US giant Newmont Corporation (NYSE: NEM) proposed to acquire it.
The Newcrest share price jumped 14% immediately upon the news, although its board has not yet accepted nor rejected the $24 billion offer.
While there is some debate as to whether Newmont should be offering a bit more to Newcrest shareholders, what if eventually a deal is done?
As an all-scrip deal, Newcrest investors will receive Newmont stock upon acquisition.
But what if you don't want to own US stocks? How do you cash out?
Shaw and Partners portfolio manager James Gerrish, in a Market Matters Q&A, explained how one could do that:
Image source: Getty Images
Newmont could do a Resmed
According to Gerrish, Newmont will likely list on the ASX once the acquisition completes.
"We would assume if Newmont [is] successful, they would create a dual listing structure, so the merged entity would remain listed on the ASX."
The merged entity could do this by listing in Australia as a chess depository interest, which is a stock that allows investors to simulate owning Newmont shares on the NYSE.
Some current examples of this are US healthcare device maker Resmed CDI (ASX: RMD) and UK banking group Virgin Money UK CDI (ASX: VUK).
Once the CDI is created, it's easy to cash in.
"Holders could then sell their stock if they wanted to as normal."
So that's all well and good for Newcrest shareholders, but what's in it for Newmont? Why would it go to the expense of listing in a foreign country?
Gerrish explained there is good incentive for overseas businesses to also list on the ASX.
"One of the reasons why they would do this deal is to tap into the funding pool in Australia," he said.
"So a listing here makes total sense."
Newcrest shares are up 9% over the past 12 months while paying a dividend yield of 1.6%.
Meanwhile, the Newmont stock price is down 21.4% for the same period while returning a dividend yield of 4.6%.
