The stock market appeared poised for a positive opening to the week Monday morning. Hopes that officials in Washington might reach resolution on a debt ceiling increase before the U.S. defaults on its sovereign debt helped lift stock market futures by around a quarter percent in premarket trading.
Many investors on Wall Street often refer to the concept of Merger Monday, as a high number of deals between companies get finalized over weekends. Two high-profile mergers are making news this morning, and although one was already largely expected, the other took some investors by surprise and led to big share-price moves for the target. Read on to find out more about both of these mergers.
Newmont will move forward with its Newcrest deal
Newmont (NEM 0.61%) got good news from Australia over the weekend. After several months of waiting, it got the go-ahead from Newcrest Mining (NCM +0.00%) on Newmont's offer to purchase the Melbourne-based gold miner.
Newmont had offered $17 billion in February to purchase Newcrest, with the goal of putting itself in an even stronger competitive position. Along with rival Barrick Gold (GOLD 2.14%), Newmont has sought to take advantage of perceived favorable valuations among gold miners to make strategic acquisitions and bolster its market share. However, some had balked at the offer, saying that it failed to give Newcrest shareholders as large a premium as many investors are accustomed to seeing. That led to Newcrest formally rejecting the initial bid.
NYSE: NEM
Key Data Points
Over the weekend, though, Newcrest backed a richer $17.8 billion offer. Under the terms of the deal, if approved, Newcrest investors will receive 0.4 shares of Newmont plus 29.27 Australian dollars per share of Newcrest stock owned. That's a slightly richer deal, and it also allows for a special dividend upon the deal's closing.
If it's successful, Newmont's merger will both dramatically increase its gold production and give the miner more exposure to the copper market. Both of those things could serve Newmont well going forward, with an expected timeline for the deal to close in the fourth quarter of 2023. Neither Newmont's nor Newcrest's share price changed much, though, reflecting the prior belief among investors that Newmont's offer would almost certainly get the nod from Newcrest eventually.
Striking oil
Making bigger waves in the market, though, was Magellan Midstream Partners (MMP +0.00%). Shares of the master limited partnership jumped more than 15% in premarket trading as the pipeline operator got a bid from an industry peer.
Oneok (OKE +0.44%) and Magellan Midstream agreed to a merger agreement worth $18.8 billion, including assumed debt. Under the terms of the agreement, Oneok will pay $25 in cash plus 0.667 shares of Oneok common stock in exchange for each publicly traded partnership unit of Magellan Midstream. That makes the overall deal worth about $67.50 per unit, representing a 22% premium to Friday's close.
NYSE: MMP
Key Data Points
The merger would create a leading energy infrastructure business, with complementary assets that could boost overall free cash flow. Oneok predicts that the deal would add 3% to 7% to earnings per share between 2025 and 2027, with projected synergy-based savings of $200 million per year. Moreover, the purchase would help Oneok avoid the newly imposed corporate alternative minimum tax for a few years.
Some Magellan Midstream investors might be disappointed that the MLP will be going away, given the high dividend yield its units paid out. However, with the potential for Magellan's business to generate even more profit going forward as part of Oneok, investors who choose to keep their Oneok shares from the deal might well end up feeling like winners as well.
