Barrick Gold announced it has proposed merging with Newmont Mining in an all-share transaction.
Under the terms of the deal, Newmont shareholders would receive 2.5694 Barrick shares per Newmont share, representing an at-market transaction based on the 20 trading days ended February 20, 2019, Barrick said.
In a statement in response, Newmont said it had already reviewed and rejected proposals from Barrick and Rangold Resources, and it proposed a joint venture with Barrick instead.
“Newmont has previously determined that Barrick’s risk and return profile is inferior on many fronts, including factoring Barrick’s comparatively ineffective operating model, poor track record on delivering shareholder returns, and unfavorable jurisdictional risk,” Newmont said in a statement.
Barrick CEO Mark Bristow said the proposal would unlock more than $7 billion net present value of real synergies, with a major portion coming from the companies’ “highly complementary assets in Nevada.”
“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,” Bristow said.
Newmont said those Nevada synergies could be achieved by entering a joint venture that would not expose Newmont shareholders to, “Barrick’s riskier portfolio, integration risks, and transaction costs.”
In January, Newmont announced it had reached an agreement to buy Goldcorp in a deal valued at $10 billion, which Barrick said was inferior to the deal it was proposing.
“The market reaction to date to your Goldcorp transaction suggests that investors do not endorse your rationale for the transaction and have concerns about the condition of Goldcorp’s asset base,” Barrick said in a letter to Newmont.
In an analyst note, Credit Suisse said Barrick’s zero-premium bid might not appeal to Newmont shareholders, but the synergies were more obvious than those with Goldcorp.
“It is possible this is simply the first step in the negotiation process, and we note that hostile takeovers tend to pose challenges,” the analysts said.