AngloGold’s Normandy bid gets the nod

No small feat, AngloGold (AU-N), the world’s biggest gold producer, has received permission from the South African Reserve Bank to proceed with its proposed acquisition of Australia’s Normandy Mining (NDY-N).

Last year, the Reserve Bank stepped in to quash Gold Fields’ attempt at a US$3.7-billion merger with Canadian royalty company Franco-Nevada Mining (FN-T).

On Sept. 5, Anglo launched an all-share bid to acquire Normandy, Australia’s largest gold miner. Aimed at creating what it describes as the “first truly global gold company,” the South African giant is offering 2.15 AngloGold shares for every 100 Normandy shares, thus valuing Normandy at A$3.2 billion (A$1.42 per share) or US$1.6 billion, based on AngloGold’s New York close on Sept. 4.

The deal, which will result in the issuance of some 48 million new AngloGold shares, represents a 29% premium to Normandy’s A$1.10 closing price on Sept. 4.

Approval for the deal is still required from holders of at least 50.1% of Normandy’s shares, AngloGold shareholders (AngloGold’s 53.3% shareholder, Anglo American [AAUK-Q], will vote in favour of the deal) and the Australian Foreign Investment Review Board. Normandy shareholders have until mid-November to respond to the offer.

From a Canadian perspective, the most notable Normandy shareholder is Franco-Nevada. AngloGold’s CEO, Bobby Godsell notes that Franco had not been consulted prior to the announcement of the bid, but adds that, as a positive sign, Franco had “been active in articulating” a need for industry consolidation and that Franco management were “not strangers to South African companies.”

If successful, the bid would create the largest gold producer in both Africa and Australia and a significant gold producer in North and South America. Combined gold production will total an impressive 9.1 million oz. per year, reserves would tally to 106 million oz.

Godsell, said of the approval, "This affirms the South African Government’s approval for the strategy that AngloGold is pursuing, namely to continue to grow this company through value-enhancing global consolidation." "The transaction further diversifies risk and enhances AngloGold’s earnings outlook to produce a company of sufficient scale to take the lead in ongoing industry rationalisation and the benefits that will flow from this," he added.