By PATRICK TALU
LIHIR Gold Limited (LGL) said the basis for rejecting Newcrest proposal to acquire 100% ordinary shares was that the company’s proposal did not adequately recognise the underlying value of LGL among others.
LGL chairman Dr Ross Garnaut in a letter to shareholders yesterday, said the offer price was inadequate and that LGL’s share of the proposed combined entity would have been insufficient having regard to the world class, long-life nature of LGL’s pure gold assets.
Dr Garnaut said the timing of Newcrest’s proposal was also unfavourable to LGL, having regard to historical relative share prices and implied trading exchange ratios for LGL and Newcrest
Newcrest’s proposal did not reflect an appropriate sharing of synergies or strategic benefits, which is the value created by the combination of the assets of the companies, from the perspective of LGL shareholders.
On April 1, LGL rejected a proposal from Newcrest to acquire 100% of LGL’s issued ordinary shares through a scheme of arrangement.
The proposal, which was received on March 29, was on the basis of one Newcrest share for every nine LGL shares plus A$0.225 per LGL share, less any interim dividend declared for the half year ending June.
Based on Newcrest’s closing share price as at March 31, the proposal was equivalent to A$3.87 per share and valued the company at approximately A$9.2 billion.
“While the LGL board recognises the strategic merits of combining the two companies, LGL’s directors, with the benefit of careful review and analysis, unanimously determined that the Newcrest proposal did not adequately recognise the underlying value of LGL,” Dr Garnaut said.
He added that Newcrest’s offer was subject to a number of conditions including detailed due diligence, exclusivity arrangements and other conditions and requirements which affected the board’s assessment of the merits of the offer.
The board judged that greater value for shareholders would be delivered by rejection of the offer.
He said: “For a range of reasons, your directors thought it important to inform shareholders of the interaction with Newcrest immediately after consideration and rejection of the offer.”