Barrick Gold makes $17.8bn hostile bid for Newmont
The bid to create the world’s largest gold producer comes after Newmont’s CEO slammed takeover talks as ‘desperate’ and ‘bizarre’
New York/Toronto — Barrick Gold is going hostile in its bid to acquire Newmont Mining and create the world’s largest gold producer by offering $17.8bn for the company in an all-share deal.
The offer raises the potential for a three-way fight between some of the world’s largest gold miners, and comes after Newmont’s CEO blasted talks about a takeover as a “desperate” and “bizarre” move by Barrick.
Barrick, based in Toronto, said it is offering “at market” valuation of 2.5694 a share for each Newmont share. That implies that it is valuing Colorado-based Newmont at $17.8bn and $33.50 a share, an 8% discount to Friday’s close.
The bid, if completed, would likely derail Newmont’s own $10bn takeover of rival Goldcorp, announced last month, putting a big question mark over the future of three large gold miners. It would also put an end to years of on-again, off-again talks to merge Barrick and Newmont, the latest of which collapsed in 2014.
“It’s a desperate and bizarre attempt to muddle up our deal,” Newmont CEO Gary Goldberg said before Barrick’s announcement. “And it’s certainly not the sort of behaviour that will appeal to investors who want to invest in serious, well-run companies.”
In an unusual step early in a takeover attempt, Barrick released a public letter to the board of Newmont with details of its proposal, urging them to support it.
Newmont said in a statement on Monday that it previously reviewed and rejected potential combinations with each of Barrick and Randgold Resources prior to the merger of those companies, which was completed last month. While Newmont’s board will “fully evaluate the Barrick proposal and respond in due course,’’ the proposed combination with Goldcorp represents the “best opportunity,’’ Newmont said.
A key part of Barrick’s quest for Newmont are its adjoining assets in Nevada. The two companies have talked about how some sort of “unification” of their operations could benefit them.
Barrick CEO Mark Bristow said in a presentation on Monday that “we as a team can’t wait until after Newmont and Goldcorp merge because we don’t want Goldcorp’s lower-quality assets in our portfolio.”
“Paying a 17% premium for Goldcorp with the second-tier assets and no synergies, followed almost immediately by the departure of Newmont CEO, strikes me as both desperate and bizarre,” Bristow said.
Newmont shares were little changed before regular trading in New York. Barrick shares rose 0.3% in pre-market trading in Toronto.
The merged Barrick-Newmont company would match Newmont’s annual dividend, Bristow said. Assuming that Newmont’s transaction with Goldcorp is terminated, “we expect that our transaction would close in the third quarter of this year.”
“There is no other transaction in our industry that can create better value for shareholders and other stakeholders than a business combination between Newmont and Barrick,” John Thornton, the executive chair at Barrick, wrote to Newmont’s board. “The market reaction to date to your Goldcorp transaction suggests that investors do not endorse your rationale.”
Building the world’s largest gold miner was a goal of Barrick’s late founder Peter Munk, but in recent years the company has struggled to keep pace as it dealt with debt issues by selling assets and seeking joint ventures.
On Friday, Canadian mining giant Barrick informed the Newmont board that it bought 1,000 shares and warned the Greenwood Village, Colorado-based miner that it plans to propose changes to its bylaws, according to people familiar with the matter.