Barrick Gold Makes Hostile $17.8 Billion Bid for Newmont Mining

(Bloomberg) -- Barrick Gold Corp. is going hostile in its bid to acquire Newmont Mining Corp. and create the world’s largest gold producer, offering $17.8 billion for the company in an all-share deal. Shares of both companies fell.

The proposed purchase, which is a discount to Newmont’s closing price on Friday, raises the potential for a three-way fight between some of the world’s largest gold miners. Newmont said its board would review the deal but made clear its previously announced plan to take over Goldcorp Inc. offers better benefits.

Newmont Chief Executive Officer Gary Goldberg isn’t giving up his company without a fight. The Colorado-based miner that’s currently the world’s largest gold producer isn’t ruling out turning the tables on Barrick with his own run at the company.

“We did over the last several years take a look at either acquiring Barrick or Randgold and we just couldn’t see the value potential,” Goldberg said in a Bloomberg TV interview Monday. Asked whether his company would reconsider now -- and if it would have the firepower to take a run at Barrick without a partner -- he said, “I think at this stage all options are open and we’ll see where we go.”

Gold miners have been merging as the price of the metal has gained in the past six months. The Barrick bid, if completed, would derail Newmont’s own $10 billion 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.

“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 Monday.

‘Desperate and Bizarre’

Barrick, based in Toronto, said it’s offering "at market" valuation of 2.5694 a share for each Newmont share. That implies that it’s valuing Newmont at $33.50 a share, an 8 percent discount to Friday’s close.

Newmont fell 0.4 percent $36.345 at 1:22 p.m. in New York, after sliding as much as 2.9 percent earlier. Barrick dropped 2 percent to $12.77, reversing a 0.6 percent gain earlier.

Newmont’s Goldberg isn’t budging on the deal with Goldcorp. “We are continuing to move forward with this transaction,” Goldberg said in a Bloomberg TV interview Monday. “The shareholders of the company are going to have to choose between two deals -- one of which you offered at a 17 percent premium and one being offered at a discount.”

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.

“It’s a desperate and bizarre attempt to muddle up our deal,”Goldberg said in an interview before Barrick’s announcement. “And it’s certainly not the sort of behavior that will appeal to investors who want to invest in serious, well-run companies.”

Barrick Chairman John Thornton “tried repeatedly” to engage Newmont around the synergies that could be worked out in Nevada, and he did that again just before Barrick announced its hostile bid, Bristow said Monday during a conference call with analysts.

Newmont said it previously reviewed and rejected potential combinations with each of Barrick and Randgold Resources Inc. prior to merger of those companies, which was completed last month. Newmont’s board will “fully evaluate the Barrick proposal and respond in due course,’’ the company 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 made clear it has no interest in the Goldcorp assets.

“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,” Barrick CEO Mark Bristow said in a presentation on Monday.

There’s a good chance Australian companies may be pulled into the Barrick-Newmont deal, should it succeed, as the combined company will seek to sell some lower quality assets, Bristow said in a Bloomberg TV interview.

“Paying a 17 percent 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.

Barrick Gold Makes Hostile $17.8 Billion Bid for Newmont Mining

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," Thornton, 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.

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