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Barrick is said to have no intention to raise Newmont offer

1st March 2019

By: Bloomberg

  

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TORONTO – Barrick Gold has no intention of increasing its hostile offer for Newmont Mining, according to a person familiar with the matter who asked not to be identified because the talks are private.

On Monday, Barrick proposed to buy Newmont in an all-share $17.8-billion hostile deal that valued the rival miner’s stock at 8% below the prior closing price. Newmont responded that its board would consider the offer, while simultaneously criticising Barrick’s operating model and saying that its own pending takeover of Goldcorp Inc. offered “superior benefits".

The world’s two largest gold producers have spent this week making their cases to their biggest investors, most of whom own shares in both companies. Barrick’s chief executive officer has defended the lack of a premium in the deal, saying there are $7 billion in synergies from the combination and that will add value. A spokesman for Barrick had no immediate comment on whether the company would change its offer.

Executive chairman John Thornton earlier this year led Toronto-based Barrick’s acquisition of Randgold Resources Ltd. in a zero-premium deal. He and CEO Mark Bristow view this type of a deal as a way forward for an industry that has been criticized previously for bidding up assets when gold prices are high.

LESS PUSH-BACK

Bristow said earlier today that the company has received less push-back from investors on this zero-premium deal than the one for Randgold, “where we had to do some convincing of the logic of an at-market transaction.”

In contrast, Newmont offered a 17% premium in its own deal to buy Goldcorp, announced last month. That transaction would be scuttled if Barrick’s offer is successful.

“It seems arrogant on Barrick’s behalf to assume shareholders will believe in the value creation of the merged Barrick/Newmont entity as the offset to a premium that’s not paid in the marketplace directly in the bid,” said Douglas Groh, portfolio manager at Tocqueville Asset Management in New York, which owns 1.35-million shares of Newmont and 175 625 shares of Barrick. “It’s cheeky on their part to assume shareholders are so naïve to assume premium value will come through their execution.”

Newmont CEO Gary Goldberg has called Barrick’s move a “desperate and bizarre” attempt to derail the takeover of Goldcorp.

“I really am not sure what they’re trying to accomplish,” Goldberg said in an interview earlier this week. “It’s a negative premium offer and on top of that would add a lot of risks to Newmont shareholders in some very unattractive jurisdictions.”

Edited by Bloomberg

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