NEWCREST Mining is set to become the world's fourth-largest gold miner after the board of Lihir Gold accepted a revised $9.5 billion takeover offer.
Although Lihir chairman Ross Garnaut said his company would continue talking to other potential bidders, the board would recommend the Newcrest bid to shareholders unless a superior offer surfaced before the second week of June.
Newcrest is expected to complete due diligence on Lihir's books on June 8 and the deal will be put to a shareholders' vote in July.
Newcrest chairman Don Mercer said there was "compelling strategic logic and merit" for the merger to proceed.
"The combined organisation will be Asia-Pacific's leading gold producer, with a standout portfolio of long-life, high-margin, tier-one gold assets," Mr Mercer said.
The revised bid values Lihir's shares at $4.03 - 6.4 per cent higher than last month's rejected takeover offer.
The merged entity will have a market worth of $24 billion, ranking it the 12th-largest company on the ASX.
Lihir was the only blue-chip mining stock to rise on Tuesday, closing up 12 to $3.79 on heavy turnover.
While the closing price represented a discount of more than 6 per cent on the takeover offer, most gold analysts expected the deal to proceed.
However, they would not rule out a rival bid from a global mining giant such as Kinross, Goldcorp or Barrick.
"This deal has been a long time coming because it is genuinely good for both companies and their shareholders," Credit Suisse analyst Mike Slifirski said.
"You can't rule out a superior offer coming over the top but it would have to be significantly higher to offset the value that Newcrest has put on the table."
Newcrest chief executive Ian Smith said the merger would deliver minimum cost savings of about $85 million, but this could increase.
Lihir chairman Ross Garnaut declined to name the potential bidders still talking to the company but confirmed they would have access to financial information until Newcrest completed due diligence on June 8.
"We've always held the view that Lihir's extraordinarily valuable asset would be of greatest value within a multi-mine company," he said.
"Our shareholders will receive a highly attractive premium and, by receiving Newcrest shares, will participate in the benefits created by the combination of the two companies."
Mr Garnaut said an independent expert's report on the merger proposal would evaluate the impact of the federal resources profit tax on the deal.
Lihir's primary gold assets are in Papua New Guinea and therefore not exposed to the new tax. That is a main attraction for Newcrest, which generates most of its earnings in Australia.
Mr Smith renewed his attack on the Government's tax proposals, but played down his claim this week that the reforms would wipe 5 per cent from the company's cashflow.
"What was announced on Sunday was the worst-case scenario but there is a lot of water to flow under the bridge," Mr Smith said.
"This may well be a topic that will be discussed a fair bit during the election but it won't be passed into legislation until after the election.
"The expectation of this going through parliament in its present configuration if you want to put a probability on it, I would put a fairly low number."
