From Breakingviews - Newmont’s $19 bln gold deal lacks investor sparkle
The logic is that absorbing Newcrest will boost the Canadian buyer’s output of gold and copper. In return, the U.S. group is paying a punchy 27% premium to its prey’s stock price before their merger haggling went public. Newmont expects to extract $500 million in annual cost savings within the first two years. Taxed and capitalised, those are worth about as much as the extra value it’s handing over to Newcrest investors.
Those savings should lift Newcrest’s expected earnings before interest and tax for the financial year to June 2025 to $1.9 billion, using forecasts compiled by Refinitiv. That implies an after-tax return on Newmont’s investment of around 7%, roughly in line with its cost of capital. This may explain why shareholders have lopped almost 12% off the U.S. company’s share price since itPalmer has also dangled $2 billion in extra cash flow from unexplained “portfolio optimisation”.
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