Fronteer bids for New West

Fronteer Development Group (FRG-T, FRG-X) is bidding for Denver-based gold explorer New West Gold (NWG-T) in an all-paper proposal supported by New West’s major shareholder, NWG Investments.

Fronteer is offering 0.26 of a Fronteer share for one share of New West, which values New West at $3.20 per share based on Fronteer’s price before the offer. New West shareholders would hold 18% of the merged company.

NWG Investments, which owns 86% of New West, has locked up its shareholding to the bid, although a superior-transaction clause allows NWG out for a break fee of $5.6 million. Fronteer has the option to match any competing offer.

New West has given Fronteer 30 days to perform due-diligence investigations and both New West and NWG are barred from soliciting other proposals during that period. Fronteer has until August 17 to make a formal takeover proposal to New West’s minority shareholders.

New West’s assets are all in Nevada and California, with the most advanced being Sandman, near Winnemucca, and Northumberland, in central Nevada.

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