Northern Star board calls Gold Fields' $27 billion bid 'opportunistic'

Elliott’s strategic-review pressure preceded the Gold Fields approach

The Australian gold miner Northern Star Resources Ltd. has rejected a takeover proposal from South Africa’s Gold Fields Ltd. that valued Northern Star’s equity at approximately US$27.2 billion, Chairman Michael Chaney said Monday.

Northern Star’s board characterized the approach as “highly opportunistic” and “materially” undervalued, telling Gold Fields on Friday that it would not engage further on the proposal. Gold Fields could not immediately be reached for comment.

The bid, submitted Sept. 14, offered each Northern Star shareholder 0.3125 new Gold Fields shares plus A$7.25 (US$5.09) in cash. Based on Gold Fields’ closing price on Sept. 11, the implied price was A$27.00 per Northern Star share, valuing the company’s equity at A$38.7 billion and representing a 22% premium to Northern Star’s closing price that day.

The rejection follows months of pressure from activist investor Elliott Investment Management, which disclosed a sizable stake in Northern Star in June after a series of guidance downgrades that prevented the miner from fully benefiting from record gold prices. Elliott has urged the miner to explore all strategic options, including a sale.

Northern Star’s leadership has been in transition. The company recently appointed Mark Cutifani, the former chief executive of Anglo American, and Peter Rozenauers, formerly managing partner of Orion Resource Partners, as independent nonexecutive directors. Suresh Vadnagra, who heads Glencore’s nickel and zinc industrial assets, has been named chief executive and is scheduled to take over the role on Oct. 5.

Northern Star said its board considers the company “uniquely positioned with a portfolio of high quality, long-life gold assets in tier-1 mining jurisdictions and the near-term catalyst in commissioning and ramp-up of the Fimiston Mill.”

Under the proposal, Northern Star shareholders would have held roughly 33% of the combined company. Chaney said Gold Fields had “asked our shareholders to take nearly three-quarters of the consideration in Gold Fields stock, which carries a meaningfully higher jurisdictional risk profile than the exposure they hold today.” Northern Star said the bid was subject to “several onerous conditions and requirements” and that a deal would have exposed its shareholders to “jurisdictional and operational risks” given its significant equity component.

Northern Star shares rose 8.5% in early Sydney trading on Monday. Northern Star has assured investors it is working to address concerns about its operational performance.