NEW YORK — By striking a deal with its biggest shareholder, embattled Newmont Mining Corp. may have succeeded in foiling a hostile bid from an investor group headed by oilman T. Boone Pickens Jr.
But the New York-based mining company also paid a heavy price to try to fend off the Pickens bid by deciding to make a special payment to shareholders totaling around $2.2 billion.
Newmont announced Monday that it has signed a 10-year agreement with Consolidated Gold Fields of Britain, its largest shareholder with 26.2% of Newmont's shares, to limit the company's stake to less than a majority.
Newmont also disclosed, however, that Consolidated Gold intends to increase its Newmont holdings to as much as 49.9%, as indicated in a document the British company filed Monday with the Securities and Exchange Commission.
That would give Consolidated Gold--which supports Newmont's management--a hefty stake in Newmont and effectively block Pickens' Ivanhoe Partners from taking control, according to some observers.
"It looks like it would blow Pickens out of the water," said Andrew Geller, an analyst for Provident National Bank in Philadelphia. Much will depend on how quickly Consolidated Gold increases its holding, he said.
Newmont's board has rejected as inadequate a $105-a-share bid from Ivanhoe for 28 million of Newmont's 66.8 million outstanding common shares. On Sept. 8, Ivanhoe launched a $95-a-share tender offer for the 28 million Newmont shares and later sweetened the offer to $105 a share.
In a separate action, Newmont declared a special cash dividend of $33 a share. The company said it would pay the dividend as part of a previously announced restructuring aimed at enhancing shareholder value and focusing on its key gold business.