Pickens Group Bids $5.64 Billion for Rest of Newmont Mining
An investor group led by T. Boone Pickens Jr. on Monday offered $5.64 billion for the 90% of Newmont Mining it does not already own, thus edging closer to possible confrontation with Newmont management or Consolidated Gold Fields, the firm’s largest shareholder.
In a letter to Newmont from Pickens’ Ivanhoe Partners, the Texas oil executive offered $95 a share cash for the remainder of the company, which has a valuable stake in a huge Nevada gold deposit as well as interests in oil and gas, coal and other resources. Pickens, who disclosed Aug. 18 that he held a 9.95% stake in Newmont, asked to meet with Newmont’s board and said he was confident that he could finance the takeover.
Neither Newmont nor Consolidated immediately responded to Pickens’ letter, but Newmont’s stock spurted $9.50 a share on news of the offer and closed the day at $92. About 3.2 million shares traded hands, making Newmont the third most heavily traded stock on the New York Stock Exchange.
Newmont’s management has rejected the idea of a takeover, and Gold Fields, the London-based gold concern that holds a 26.2% stake in Newmont, has said it would support Newmont management in resisting a takeover threat.
But Pickens’ letter persuaded more Wall Street analysts that he is serious about bidding for the company, and some predicted that the move would soon force a defensive response from the two allied concerns. Pickens “seems to have the wherewithal, and he’s serious,” said Robert H. Hinckley III, analyst with E. F. Hutton in New York.
Analysts said Newmont and Gold Fields, which is controlled by South African mining magnate Harry Oppenheimer, might be contemplating one of several defensive moves.
Gold Fields might try to top a $95-a-share offer. That would yield a handsome profit for Pickens, who has paid an average of about $66 a share for his Newmont stake, estimated Ronald Shorr, analyst with Bear, Stearns & Co.
Analysts theorized that Newmont might try to repel Pickens by spinning off its 90% stake in Newmont Gold, the company unit that owns the Nevada gold interests. Such a spinoff--a so-called crown jewel defense--would seek to ward off Pickens by ridding Newmont of the asset he values most.
The company’s gold interests may represent more than two-thirds of its asset values, analysts said.
Analyst Shorr said Newmont might also try to increase Gold Fields’ leverage by giving it more shares in exchange for assets and cash. Even raising Gold Fields’ stake to 35% might be sufficient to ward off Pickens, he said.
Under a 4-year-old agreement, Consolidated was limited to a stake of 26% unless another shareholder amassed more than a 9.9% share, a threshold Pickens reached Aug. 18.
Some have theorized that Pickens has recently amassed stakes in aircraft maker Boeing, the defense contractor Singer and, more recently, in Newmont to raise enough cash to pay distributions that soon come due to investors in his Mesa Limited Partnership. The theory is that once it’s known that Pickens is buying, the price of the stock will rise and he can make a quick profit. Pickens must come up with about $100 million during the next 12 months to meet those obligations, said Frederick C. Leuffer, analyst with C. J. Lawrence & Co.
In his letter, Pickens said he would be willing to discuss alternatives to Consolidated’s sale of its stake in Newmont. Consolidated might be able to hold a minority interest in Newmont, or its assets.
Ivanhoe consists of Mesa Limited Partnership, Pickens’ firm; Harbert Corp., which is led by Birmingham, Ala., businessman John Harbert III; NRM Energy Co., a Dallas firm, and Galactic Resources Ltd., a Vancouver-based gold exploration and mining concern.
Last month, Pickens disclosed that he had bought 4.4% of Singer and might buy 15% of the firm. In July, he said he planned to buy $15 million of Boeing stock and asked permission to buy as much as 15%.
NEWMONT MINING AT A GLANCE A diversified natural resources company with interests in gold, oil and gas, coal and other minerals, Newmont has recently doubled its production of gold. In addition, Newmont owns 49% of Peabody Coal, the nation’s largest coal producer.
Year ended Dec. 31 (in millions)
1986 1985 1984 Revenue $380.8 $684.8 $770.1 Net income 68.5 36.0 37.2
Assets: $761 million
Employees: 27,000
Shares outstanding: 66.4 million
12 mo. price range: $26.875 - $92
Monday’s close (NYSE): $92, up $9.50
