AngloGold launches $1.7B Normandy bid

AngloGold chief Bobby Godsell wants to create the world's first 'truly global gold company' by taking over Normandy

By CNN's Geoff Hiscock, Asia business editor

SYDNEY, Australia (CNN) -- South Africa's AngloGold Limited, the world's largest gold miner, launched a $1.7 billion friendly takeover bid for Normandy Mining Wednesday.

Normandy is Australia's largest and the world's seventh largest gold producer.

AngloGold chairman and chief executive Bobby Godsell said a successful bid would create "the world's first truly global gold company" and would lift AngloGold's market capitalization to about $5.5 billion.

Normandy executive chairman Robert Champion de Crespigny called AngloGold's offer a "logical industry move" but said the company needed time to assess it.

At a briefing late Wednesday, de Crespigny stressed that while it was "not an agreed or recommended transaction", that should not be read as a perception of hostility.

Analysts said the bid could be seen as friendly.

'Larger scale now required'

De Crespigny said increasing consolidation in the gold industry was necessary, and while Normandy had acted as a consolidator, "we recognize that even larger scale is now required".

AngloGold is offering 2.15 of its shares for every 100 Normandy shares. Based on Normandy's closing price on Tuesday of Aust. $1.10, the bid represents a premium of 29 percent at A$1.42.

After Normandy shares were released from a trading halt Wednesday, they moved sharply higher, closing up 24 cents or 22 percent at A$1.34.

AngloGold shares had closed Tuesday on the Australian Stock Exchange at Aust $65.50, and at $17.85 on the New York Stock Exchange.

Annual production of 9.1 million ounces

Godsell said the two companies would have a combined annual gold production of 9.1 million ounces and would reinforce AngloGold's position as the world's leading producer. Earnings before interest, tax and depreciation would be $891 million -- the highest in the gold industry.

The new company would be the largest producer in Australia and Africa and would have a "significant presence" in North and South America.

Godsell said the greater diversity of production operations on four continents should reduce the company's cost of capital.

Another important consideration was the size of the free float, post-merger. It would almost double, thereby providing greater liquidity in the three markets where AngloGold is listed: Johannesburg, New York and Australia.

JP Morgan analyst Geoff Breen told CNN it seemed unlikely there would be other bidders, as the only two companies with the capacity, Canadian miners Placer Dome and Barrick Gold, did not have the same need as AngloGold to diversify beyond its South African base.

He said the gold industry around the world was rationalizing, but so far Australia had been a "bit slow" in taking part in the process.

Interests in Australia, Africa, Americas

Normandy's gold properties in Australia include 50 percent of the Super Pit near Kalgoorlie in Western Australia; 50 percent of the Pajingo mine in Queensland; about 45 percent of Boddington in Western Australia in a joint venture with AngloGold, and other operations at Tanami in the Northern Territory and Yandal in Western Australia.

It also has interests in North and South America, including the Midas mine in Nevada.

In addition to its South African mines, AngloGold has interests in Brazil, Argentina and Colorado in the U.S.

In a statement to shareholders Wednesday, de Crespigny said it was fair to say that AngloGold's objectives in its offer were similar to the strategies expressed by Normandy.

While AngloGold was an industry leader, Normandy still needed to complete a full review of the offer, he said.