Northern Star Board Rejects Gold Fields' $27 Billion Bid as Highly Opportunistic Grab

Northern Star Resources, Australia's largest gold miner by market value, has slammed the door on a takeover from South Africa's Gold Fields. The board unanimously rejected the proposal, calling it materially undervalued and highly opportunistic.

Gold Fields offered 0.3125 of its own shares plus A$7.25 in cash for each Northern Star share, CNBC reported. When the approach arrived on September 14, it was worth about A$38.7 billion (around $27.15 billion), a 22% premium to Northern Star's September 11 close.

That value did not hold. Because most of the offer was paid in Gold Fields stock, it shrank as those shares moved. By Gold Fields' close on September 25, the implied value had slipped to A$36.1 billion.

"Well short of fundamental value"

Chairman Michael Chaney said Gold Fields was seeking one of the world's premier gold portfolios well short of its fundamental value, at a highly opportunistic time. The board also objected to the heavy reliance on stock and to several conditions attached to the proposal. On Friday it told Gold Fields it was not appropriate to engage further.

Investors seemed to read the rejection as a sign more money could follow. Northern Star shares closed up 6.15% on Monday after rising more than 9% during the session.

The Africa discount

A combination would have created the world's No. 2 gold producer. Northern Star also flagged jurisdictional and operational risks, a pointed reference to where Gold Fields does business.

As Semafor notes, African gold assets trade at a discount for reasons that are easy to list. Ghana has pushed royalties up to 12% and declined to renew a Gold Fields licence, while governments in Mali and Burkina Faso have seized mines or taken bigger stakes. Swapping Australian ounces for exposure to that mix is a hard sell, even with gold near record highs and central banks moving bullion around.

For now, Northern Star has said no. Gold Fields has not said it is walking away.