Northern Star Resources Ltd (ASX: NST) shares are sinking on Monday morning.
At the time of writing, the gold miner's shares are down 5% to $16.60.
This follows news that it has signed an agreement to acquire a fellow ASX 200 share in a blockbuster $5 billion deal.
Which ASX 200 gold share is being acquired?
According to the release, Northern Star and De Grey Mining Limited (ASX: DEG) have entered into a binding scheme implementation deed. This will see Northern Star acquire 100% of De Grey by way of a court-approved scheme of arrangement.
De Grey Mining shares are up 29% to $1.96 on the news.
Northern Star notes that upon completion of the transaction, it will acquire De Grey and its flagship project, Hemi. It is a low-cost, long-life and large-scale gold development project in the Pilbara region of Western Australia.
It also highlights that the Hemi Project is one of the largest undeveloped gold projects in a Tier-1 mining jurisdiction globally. It has mineral resources of 11.2Moz, ore reserves of 6.0Moz, and forecast annual gold production of 530koz per annum over its first 10 years.
Management believes that Northern Star's extensive exploration, mine development and operating expertise will unlock the long term value potential of the Hemi Project. This in turn is forecast to generate superior returns to all shareholders.
Northern Star's managing director and CEO, Stuart Tonkin, said:
The acquisition of De Grey is strongly aligned with Northern Star's strategy and contributes to our purpose of generating superior returns for shareholders. De Grey's Hemi development project will deliver a low-cost, long-life and large-scale gold mine in the Tier-1 jurisdiction of Western Australia, enhancing the quality of Northern Star's asset portfolio to generate cash earnings.
What is being offered?
The two ASX 200 shares have agreed a deal that will see De Grey shareholders receive 0.119 new Northern Star shares for each De Grey share held at the record date.
This represents an implied offer price of $2.08 per share (a 36.8% premium) and a total equity value for De Grey of approximately $5 billion on a fully diluted basis.
Upon completion, Northern Star shareholders will own approximately 80.1% of the combined group and De Grey shareholders will own approximately 19.9%.
The companies note that the scheme is unanimously recommended by the board of directors of De Grey. As such, each De Grey director intends to vote all shares that they hold or control in favour of the scheme. This is subject to no superior proposal emerging and the independent expert concluding that it is in the best interest of shareholders.
De Grey's managing director, Glenn Jardine, said:
Given the high-quality nature of Hemi, De Grey is in the fortunate position to have had many avenues to progress the asset, including M&A. The Transaction that we have entered with Northern Star today is a highly attractive opportunity for De Grey shareholders in terms of the upfront premium, as well as retaining ongoing exposure to Hemi and gaining exposure to the broader Northern Star portfolio.
