By Rhiannon Hoyle

Australia's Gold Road Resources agreed to a sweetened US$2.4 billion takeover by South Africa's Gold Fields, after rejecting an earlier bid against a backdrop of surging gold prices.

Gold Fields approached its joint-venture partner in the Gruyere gold mine in Western Australia in March with a US$2.1 billion takeover proposal, but directors at Gold Road rejected that bid as highly opportunistic and materially undervaluing the company.

The new offer values Gold Road's equity at roughly 3.7 billion Australian dollars (US$2.4 billion) and indicates an enterprise value of A$2.6 billion.

The deal has been agreed at a time of record-high gold prices, with the precious metal above US$3,000 a troy ounce for the first time as economic uncertainty fuels demand for bullion as a safe haven.

Under the terms of the deal, Gold Road shareholders will receive cash worth roughly A$3.40 a share, a 43% premium to the company's closing price before Gold Fields' proposal was made public in March.

The deal includes a fixed cash payment of A$2.52 per Gold Road share, minus any special dividend paid before the takeover closes. Gold Road intends to declare a special dividend of roughly A$0.35 a share if the deal goes ahead, in order to use up some Australian tax benefits known as franking credits.

It also includes a variable cash payment linked to Gold Road's stake in Northern Star Resources, worth roughly A$0.88 a share as of Friday.

Directors of Gold Road unanimously recommend shareholders vote for the takeover.

"The scheme provides Gold Road shareholders with an opportunity to realize certain value for their Gold Road shares at a compelling premium," said Chief Executive Duncan Gibbs.

Gibbs said in a March interview that price had been the key sticking point in deal talks. The companies are assessing a potential underground expansion at Gruyere gold mine, which Gold Fields operates. The initial bid for Gold Road attributed no value to that possible expansion, Gibbs said.

Gold Road sold a 50% interest in Gruyere--then just a project--to Gold Fields in 2016.

When announcing its unsuccessful bid in March, Gold Fields argued the Gruyere operation would be better off in its hands, eliminating inefficiencies associated with the current joint-ownership.

Mike Fraser, Gold Fields's CEO, said at that time that the South African company would continue to seek talks on a potential takeover. A spokesperson for Gold Fields could not immediately be reached for comment on Monday.

Gold-mining companies have been actively dealmaking amid the rally in metal prices. Newmont, the world's biggest gold producer, has struck deals to sell a number of assets following its $17.5 billion acquisition of Australia's Newcrest Mining, the gold-mining industry's biggest-ever takeover.

In March, Australia's Ramelius Resources agreed to buy Spartan Resources in a deal valuing Spartan at roughly US$1.5 billion. In October, Gold Fields completed an acquisition of Canada's Osisko Mining worth about US$1.4 billion.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

May 04, 2025 20:31 ET (00:31 GMT)

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