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Saracen (ASX:SAR) and Northern Star (ASX:NST) shares on watch after merger update

The Saracen Northern Star merger is in the news after the companies released a joint statement about their first court hearing on the merger.
The post Saracen (ASX:SAR) and Northern Star (ASX:NST) shares on watch after merger update appeared first on The Motley Fool Australia. –

asx gold share merger represented by hand shake of two golden hands

The Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) share prices will be on watch today after the companies released an update from their first court hearing related to the merger between the two companies.

What did they announce?

In a joint statement this morning, the two companies reported that the Supreme Court of Western Australia has ordered Saracen to convene a meeting of its shareholders to consider and vote on the merger scheme.

The court also ordered Saracen to approve the dispatch of an explanatory statement providing information about the scheme, and notice of the scheme meeting.

The joint statement confirms that the merger scheme continues to be unanimously recommended by both companies’ boards, subject to no other superior proposals, and that the boards believe the merger is in the best interests of shareholders.

The meeting for Saracen shareholders to vote on the proposed merger will be held 15 January 2021.

Why are the two gold miners merging?

The merger is worth $16 billion, and will see Northern Star acquire 100% of Saracen.

When it was announced back in October, Northern Star Executive Chair Bill Beament stated his belief that the merger will create considerable value for both sets of shareholders. He explained:

This is significant value-creating M&A. Northern Star has only ever pursued growth when it will create value for shareholders, and this merger-of-equals will create an abundance of value for both Northern Star and Saracen shareholders.

This sentiment was echoed by Saracen Managing Director Raleigh Finlayson, who told shareholders the company alone cannot create the sort of value that will be delivered by the merger. He said:

The benefits which will flow to Saracen shareholders from this merger are significant. The pre-tax synergies alone are expected to be worth in the order of $1.5 billion to $2 billion over the next 10 years.

Saracen shareholders will own 36% of the combined group and therefore share in the significant benefits of these synergies.

In a bid to sweeten the deal, Saracen will also pay its shareholders a 3.8 cent dividend prior to the merger, worth about $42 million in total.

How have the Saracen and Northern Star share prices been performing?

Since the merger was first announced on 6 October, both companies’ share prices have fallen in value. The Saracen share price has lost 7%, while the Northern Star share price fell 6%.

To put things in perspective, Saracen has a market capitalisation of $5.4 billion, while Northern Star commands $9.6 billion.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Saracen (ASX:SAR) and Northern Star (ASX:NST) shares on watch after merger update appeared first on The Motley Fool Australia.

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