Feb 25, 2019
Barrick formally proposes US$18B all-stock Newmont takeover
Barrick tables all-stock Newmont takeover
Barrick Gold Corp. (ABX.TO) has formally proposed combining with Newmont Mining Corp. (NEM.N)
Under the terms of the proposal that was unveiled early Monday, Barrick is offering 2.5694 shares for each Newmont share. If the deal goes ahead, Barrick would own 55.9 per cent of the combined entity. Based on Barrick’s closing price of US$13.04 per share on the New York Stock Exchange Friday, its offer is worth almost US$18 billion.
In a release, Barrick said uniting with Newmont is a "logical and long overdue imperative for shareholders," and framed its proposal as a "significantly superior alternative" to Newmont's pending US$10-billion acquisition of Goldcorp Inc. Indeed, Barrick said annual synergies from its proposal would be 7.5 times larger than what Newmont can expect from its purchase of Goldcorp.
"Considered globally, the merger represents a radical and long-overdue restructuring of the gold industry, and a transformative shift from short-term survival tactics to the long-term creation of sustainable value," said Barrick CEO Mark Bristow.
The announcement comes after a remarkable sequence of events.
On Friday, Barrick confirmed it had "reviewed the opportunity to merge" with Newmont after Bloomberg News and The Globe and Mail reported on the possibility of a bid.
On Sunday, Newmont disclosed Barrick is seeking to lower the threshold for calling a special shareholder meeting, while Newmont CEO Gary Goldberg blasted Barrick's tactics as "desperate and bizarre" – which prompted Bristow to fire back.
“Our proposal is based on sound business rationale and industrial logic,” he said in a conference call with analysts Monday. “[Newmont] paying a 17 per cent premium for Goldcorp and its second tier assets and no synergies, followed almost immediately by the departure of Newmont’s CEO, strikes me as both desperate and bizarre.”
Combining Barrick with Newmont has been a frequent source of speculation, largely because of the companies’ respective footprints in Nevada. Indeed, in its announcement on Monday, Barrick said “the efficient rationalization” of assets could allow for more than two decades worth of profitable production in that state.
Barrick also went public on Monday with the letter its executive chairman, John Thornton, and Bristow sent to their counterparts at Newmont. In the letter, Barrick’s leaders referred to their proposal as a “once- in-a-lifetime opportunity,” while indicating they want to move “expeditiously” and have “limited” need for further due diligence.
Thornton and Bristow also stated Barrick’s proposal is conditional on Newmont abandoning its takeover of Goldcorp.
In a release, Newmont said its board will “fully evaluate” Barrick’s proposal, while noting its deal with Goldcorp is “the best opportunity” for shareholders. The company also pointed out it previously rejected approaches by Barrick and Randgold Resources Ltd. prior to their tie-up.
“From my standpoint, we’ve always been open to trying to do something [with Barrick in Nevada],” said Newmont CEO Gary Goldberg in an interview with Bloomberg Television on Monday. “I was really hoping with Mark [Bristow] coming in, that we’d have a party on the other side that actually got mining.”
“What we’ve seen in the last day suggests that John [Thornton] is still firmly in control and trying to drive things the way he sees best. Quite frankly, he was fearful of our joining up with Goldcorp in terms of what that meant to Barrick going forward.”
Editor’s note: An earlier version of this story incorrectly quoted Mark Bristow. BNN Bloomberg regrets the error.