Newmont set to win Normandy with improved £1.5bn offer

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The Independent Online

Anglogold yesterday appeared to admit defeat in the bid battle for Normandy Mining, after US rival Newmont again increased its offer for the Australian company.

Newmont boosted the cash element of its offer by 10 Australian cents a share, with the Normandy board recommending the new A$4.3bn (£1.5bn) bid, worth A$1.90 cents a share. Success would allow Newmont to surpass AngloGold as the world's biggest gold producer.

AngloGold, which is based in South Africa and is partly owned by the London-listed Anglo American, had bid for Normandy first in September with a A$3.2bn offer. Newmont came in with a counter-offer in November and each side has sweetened its offer twice since then – the latest being Newmont's offer yesterday.

The bidding has taken the price even beyond an independent assessment of Normandy, which had put a fair value of A$1.48 to A$1.88 a share on the company, which is Australia's leading gold producer. AngloGold blinked first and yesterday said it could justify going no higher than its last A$1.83-a-share bid.

Bobby Godsell, the South African group's chairman, said: "AngloGold's offer is full and fair and the company has no basis upon which it could justify an increase in its offer."

Analysts said that Newmont appeared to have walked away as the victor, given it had the Normandy board's recommendation, a higher overall bid and a greater cash element – A$0.50 a share versus A$0.30 a share from AngloGold.

Wayne Murdy, chairman of Newmont, said: "Our bid is clearly superior to AngloGold's and provides Normandy shareholders significantly higher overall value, approximately 67 per cent more cash up front and the ability to participate in the world's premier gold company."

Newmont also has Normandy's biggest shareholder, Franco-Nevada, on board, and it is offering American paper, compared with AngloGold's potentially riskier South African shares. Normandy investors will now decide between the two.

Peter Dupont, an analyst at Commerzbank, said: "I suspect it's over unless someone else enters the fray. There's no particular virtue in just being the biggest so if another contender bids higher now, it would have to be carefully justified."

AngloGold pointed out that investors accepting its offer would get their money before those going for Newmont and that the AngloGold bid was less conditional and came with the prospects of higher dividends going forward. Also, as both offers pay largely in shares, their respective values continue to fluctuate.

Mr Godsell said: "The market must judge the offers on their merits, taking into account the relative underlying value of the companies and their potential to re-rate.... AngloGold's offer provides value today and value in the future."

If another contender now steps in, it is most likely to be Barrick, a giant Canadian producer, but this is thought to be a remote possibility. Commerzbank's Mr Dupont pointed out that Newmont may be prepared to pay more because it has a more bullish view of the prospects for the gold price. Unusually, Newmont does not forward hedge its gold production and it plans to unwind Normandy's hedge-book, potentially boosting the gold price.