IntroductionNewmont Mining Corporation, Normandy Mining Limited and Franco-Nevada Mining Corporation Limited today announced transactions which provide for Newmont to acquire Normandy and Franco-Nevada, creating the world’s largest gold producer. The resulting company will be:
· #1 in gold reserves (97 million ounces)
· #1 in gold production (8 million ounces per year)
· #1 in leverage to gold among majors
· #1 in trading liquidity
· #1 in EBITDA
Newmont intends to make a recommended offer of 0.0385 shares of Newmont common stock for each Normandy common share. In addition, Newmont will pay A$0.05 per Normandy common share in cash if the Newmont offer is accepted by holders of at least 90% of the Normandy common shares, as described further below. Newmont also agreed to acquire Franco-Nevada in a stock-for-stock transaction, in which Franco-Nevada common shareholders will receive 0.8 of a share of Newmont common stock (or exchangeable shares, exchangeable for Newmont common stock) for each share of Franco-Nevada common stock pursuant to a Canadian Plan of Arrangement. The respective transactions have been approved and are recommended by the boards of directors of all three companies.
The offer for Normandy, including the conditional cash component assuming 90% acceptance, represents A$1.70 per share based on closing stock prices and the exchange rate on Tuesday, November 13 and A$1.78 per share based on the volume average weighted average price of Newmont over the previous five days. The offer substantially represents a premium of 21% over the current value of the offer for Normandy announced by AngloGold Ltd. on September 5, 2001. Franco-Nevada, which owns 446 million shares (19.9%) of Normandy common stock, has granted to Newmont the right to acquire its block of Normandy common shares, exercisable at Newmont’s discretion, at the exchange ratio in its bid for Normandy.
Financial Strength, Leverage to Gold and SynergiesWayne W. Murdy, President and Chief Executive Officer of Newmont, said, “Newmont will become one of the best-capitalized companies in the gold mining industry, with enhanced strength and flexibility to continue to explore, develop new projects and make strategic investments as opportunities arise. With a combined cash position of over US$700 million, Newmont will reduce its net debt to net book capitalisation ratio to 18% from 41%.”
Consistent with its position as a largely unhedged producer, Newmont does not intend to enter into new gold hedging positions. Going forward, Newmont expects to deliver production into Normandy’s existing hedge contracts, but will seek to unwind the positions when economically attractive.
In consolidating the three companies, Newmont expects to realize approximately US$70 million to $80 million in annual after-tax synergies after the first full year, increasing to approximately US$80 million to $90 million a year by the end of the second year. The acquisitions are expected to be immediately accretive to Newmont’s earnings, free cash flow and net asset value.
The New Gold StandardMr. Murdy said, “Newmont’s global operating and development skills, Normandy’s Australian and international mining portfolio and Franco-Nevada’s financial and dealmaking strength, together, create the new gold standard for the 21st Century. Current Newmont shareholders will enjoy a more diversified asset base and balanced risk profile, increased trading liquidity, a solid capital structure and an excellent platform for future growth, all with the industry’s greatest leverage to a rising gold price.”
Robert J. Champion de Crespigny, Chairman and Chief Executive Officer of Normandy, said, “We are excited that Normandy shareholders and management will participate in creating the leading gold company in the world. Normandy shareholders are receiving a superior bid, which both the Board and I enthusiastically endorse and recommend. Shareholders will own equity in a liquid, North American company with the financial strength to advance our many attractive development projects.”
Pierre Lassonde, President and Co-Chief Executive Officer of Franco-Nevada, said, “Along with Newmont management, we are optimistic about the future price of gold. Franco-Nevada shareholders benefit from this transaction by substantially increasing their leverage to gold in the number one gold company in the world. I am looking forward to working alongside Wayne.”
The exchange ratio of the stock component of the Newmont offer for Normandy represents a 25% premium over the average exchange ratio between Normandy’s share price and Newmont’s share price for the year prior to the announcement of AngloGold Ltd.’s offer for Normandy (September 5, 2001). The A$0.05 payment in cash, payable upon acceptance of the Newmont offer by 90% of the outstanding shares on a fully-diluted basis, would represent an additional premium to Normandy’s shareholders.
Assuming Franco-Nevada is acquired by Newmont, it will be considered to have accepted the Newmont offer for this purpose. In addition, the cash payment would be subject to the approval of certain matters by the Australian Securities & Investment Commission (ASIC). The exchange ratio in the Newmont/Franco-Nevada transaction implies a price for Franco-Nevada of C$28.36, based on Tuesday’s closing stock prices and exchange rate. This ratio represents a premium of 23% over the average exchange ratio between Franco-Nevada’s share price and Newmont’s share price during the past year.
Newmont shareholders will continue to own slightly more than 50% of the combined company with the balance being owned approximately 32.5% by Franco-Nevada shareholders and approximately 17.5% by Normandy shareholders. The transaction is intended to be tax free to the Franco-Nevada shareholders in Canada and the United States and the exchangeable shares are intended to qualify for investment by Canadian tax exempts outside of their “foreign property” baskets.
Support for TransactionsNewmont has performed due diligence with regard to Normandy and Franco-Nevada and has obtained:
· approval by the boards of directors of all three companies of their respective transactions, as well as their recommendations that their shareholders support the transactions;
· a commitment of Franco-Nevada’s 19.9% interest in Normandy to Newmont’s acquisition of Normandy;
· commitments from both the Chairman and the President of Franco-Nevada to vote their shares in favour of Newmont’s acquisition of Franco-Nevada; and
· commitments from both the Chairman and the President of Franco-Nevada to not dispose of certain of the Newmont or exchangeable shares received by them for three years following the consummation of the transactions.
The New NewmontThe combined company will have global reach and scale:
· 22 mines on 5 continents;
· interests or participations in another 8 gold operations;
· approximately 70% of its combined production and reserves from North America and Australia;
· 12,500 employees; and
· preeminent land positions in world-class gold districts in Nevada, Western Australia and Peru, and a portfolio of promising development and exploration projects.
Leadership RolesMr. Murdy will be Chairman and Chief Executive Officer of Newmont, effective January 1, 2002. Mr. Lassonde will be President of the combined company. The board of directors of the combined company will have up to 17 members. Messrs. Lassonde and Seymour Schulich, Chairman and Co-Chief Executive Officer of Franco-Nevada, will join the combined company’s Board of Directors. Mr. De Crespigny, along with two other individuals, one nominated from among Normandy nominees and one chosen by Franco-Nevada, will be offered positions on the expanded Newmont board.
Mr. Murdy said, “We are committed to expanding Franco-Nevada’s precious metals royalty business, building on the portfolio management capabilities of Franco-Nevada in a newly created Newmont business unit. We expect this to provide Newmont with a stable, high-margin income stream to complement its strong leverage to gold. The combined company also will benefit from Normandy’s land package and abilities in advancing projects into reserves, combined with Newmont’s superior operating skills and the financial strength of Franco-Nevada, to build the world’s best gold company.”
Transaction HighlightsThe transactions are subject to customary regulatory approvals in the United States, Australia and Canada, as well as to approval by the holders of Newmont common shares. The Franco-Nevada acquisition is conditioned upon shareholder and court approval as well as tenders by at least 50.1% of the Normandy shares under the Newmont bid (which may include Franco-Nevada’s 19.9% stake). The transactions are expected to close in the first half of 2002.
Newmont intends to make an off-market takeover bid for all outstanding Normandy common shares. This bid will include a minimum acceptance condition of 50.1% of the Normandy common shares, calculated on a fully-diluted basis (which may include the 19.9% stake that Franco-Nevada has committed to Newmont). Details of the bid, including conditions, are set out in the schedule to this announcement.
Newmont intends to acquire Franco-Nevada in a shareholder and court-approved Plan of Arrangement. The combined company will be US-incorporated, with headquarters in Denver, Colorado.
The common stock of the company will trade as “NEM” on the New York Stock Exchange and Newmont will apply for listing of its securities on the Australian Stock Exchange, as a company incorporated in the United States. Newmont’s exchangeable shares will trade in Toronto, on the Toronto Stock Exchange.
If the transaction with Newmont do not occur under certain circumstances, the agreements announced today provide for break-up fees of up to US$100 million, payable to Newmont by Franco-Nevada, and A$38.33 million payable to Newmont by Normandy.
Newmont was advised by J.P. Morgan Securities Inc. and Goldman Sachs & Co., and its legal advisors on the transactions were Wachtell, Lipton, Rosen & Katz, Goodmans LLP and Gilbert and Tobin. Normandy was advised by Macquarie Bank and the law firm of Allens Arthur Robinson. Franco-Nevada was advised by National Bank Financial and CIBC World Markets and the law firm of Gowling Lafleur Henderson LLP.
Newmont is a leading world gold producer with operations in 8 countries, including: the United States, Canada, Mexico, Peru, Bolivia, Uzbekistan, Australia and Indonesia.
Headquartered in Toronto, Canada, Franco-Nevada is the leading precious minerals royalty company and, by market capitalization, ranks among the largest gold companies in the world. Franco-Nevada is Normandy’s largest shareholder, with a holding of 446 million shares, or 19.9% of the outstanding common shares, all of which have been committed to Newmont in the transaction.
Headquartered in Adelaide, Australia, Normandy is Australia’s largest gold company, producing over 2 million ounces of gold a year.