👉 Background: Newcrest is an ASX-listed company that operates gold and copper mines in Australia and Papua New Guinea. In recent years, it has expanded into the 'Americas' too with investments into mines in Canada and Ecuador too.

👉 What happened: The largest gold mining company in the universe, Newmont Corp, is looking to get its gold-encrusted-hands on Australia-based Newcrest. Now, they’ve lobbed a $24.5 billion bid at Newcrest.

👉 What else: This offer is a 22% premium to Newcrest's pre-offer share price - so it's no surprise that Newcrest’s shares jumped more than 9 per cent yesterday. But the interesting part is that this $24.5 billion dollar offer is entirely in scrip.

What's the key learning?

💡 A scrip bid is when a company takeover is made in shares as opposed to cash. If the takeover bid is accepted, Newcrest shareholders will receive shares in the newly merged company rather than cash.

💡For many takeovers, an all-scrip offer isn’t as appealing because it means you’re relying on the performance of the merged company. Case in point: Square's acquisition of Afterpay for $39 billion was an all-scrip deal. The value of Square has dropped over 30%.

💡But in the gold industry, the idea of an all-scrip deal is less risky because gold is actually its own financial asset. So if the new merged-company company was to go belly-up, the intrinsic value of their gold reserves would still hold some value.

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