Northern Star Resources Ltd (ASX: NST) is set to acquire 100% of fellow gold miner De Grey Mining Ltd (ASX: DEG) in a court-approved deal that is set to reshape both companies.
If De Grey shareholders approve the deal at the scheme meeting, which is to be held tomorrow (April 16), then we can expect the deal to be finalised by the end of April.
What does this mean for investors moving forward? Let's take a dive and see.
Northern Star not just mining gold
The deal, valued at around $6 billion, was first announced in December last year. It is one of many announced in recent months as the price of gold has soared to new highs.
As recently as this week, gold has topped all-time highs of US$3,100 per ounce, as market participants have searched for safe-haven assets while stocks have remained volatile.
As for the transaction, Northern Star's offer is currently pending approval, with De Grey's shareholders set to vote at the scheme meeting this Wednesday. If all goes according to plan, the deal will be effective April 23.
A critical supporter of the deal is Gold Road Resources (ASX: GOR), which holds a significant stake in De Grey.
On Monday, Gold Road confirmed it will vote in favour of the acquisition. It owns around 17% of De Grey, worth more than $1 billion at the time of writing – a hefty payday that provides well-needed cash.
What's next?
If approved, De Grey shareholders will convert their holdings into Northern Star shares. If all goes smoothly, the business will fully integrate into Northern Stars' operations by May 5.
But what's in it for Northern Star shareholders? Every acquisition comes with its own risks. The aim for Northern Star? Capitalise and strengthen its position in the local gold mining sector.
If successful, De Grey's assets, which include promising exploration projects, could provide Northern Star with additional growth opportunities.
Patrick Streater, of Australian stockbroker Argonaut, expects the transaction to go ahead. Speaking to The Australian Financial Review, he also said Gold Road would "look to monetise its Northern Star shares to pursue mergers and acquisitions for another asset".
So it's important for investors to stay informed on the approval process as there's plenty of moving parts here.
Foolish takeaway
Northern Star is set to acquire De Grey Mining, and if all goes according to plan, the deal will be approved by the end of April. What this means for both companies remains to be seen, but there is confidence on Northern Star's part.
Its stock is up 42% in the past year, with De Grey climbing more than 81%.
