Barrick Offers More Talk But Not More Stock for Acacia Stake

(Bloomberg) -- Barrick Gold Corp.’s CEO has no intention of raising his offer to buy out the rest of troubled African unit Acacia Mining Plc -- but he will use the next three weeks to talk.

Barrick said in a statement on Tuesday it received a three-week extension to make a formal offer to minority shareholders for the roughly 36% stake in Acacia it doesn’t already own.

“My job is to sit down in the next few weeks and work through it with the minority shareholders,” Barrick Chief Executive Officer Mark Bristow said in a phone interview Tuesday. Asked if those talks will include an offer for a higher indicative price, he was unequivocal. “No, we’re not,” he said. “We’re not. We would have done that already.”

On Wednesday, Barrick released another statement citing Bloomberg’s interview with Bristow and confirming it’s “proposing to engage intensively with Acacia’s minority shareholders.” Barrick’s shares fell as much as 1.5% in pre-market trading in New York, while Acacia declined in London.

Export Ban

The clock is ticking as the London-listed unit, stuck in a public battle with Tanzania’s government since 2017, has seen its shares collapse by more than 60%. The Tanzanian government won’t engage with Acacia in any way, Bristow said, raising the possibility the situation could get even worse. “How much longer can these assets actually survive in a situation where the executive management of Acacia is unable to travel to the country, even?”

Two years ago, Tanzania handed Acacia an export ban and a $190 billion tax bill, saying it falsely declared bullion sales abroad. Since then, the miner’s position in the East African country has deteriorated further. Its relationship with Barrick has also become increasingly strained, although Bristow said Tuesday’s statement from Acacia is a positive step on that front.

Acacia said in a statement Tuesday it was open to a formal offer, provided the price was fair and its shareholders support the transaction. But on Wednesday, Acacia said it “strongly disagrees” with a number of statements in Barrick’s announcement regarding the situation in Tanzania and its mine plans in the East African nation. Acacia said in that statement it would provide a detailed response in due course, and urged its shareholders to take no action.

‘Being Genuine’

Under an informal proposal by Barrick in May, the Toronto-based company would buy out Acacia’s minority shareholders with its own shares at a ratio that implied a discount to the unit’s market value. Not all shareholders jumped on board, arguing the indicated price was too low, a fact Bristow has found frustrating. “We thought that they would at least accept that we were being genuine. But some people haven’t got their head around that, despite the fact that they are shareholders in Barrick and they have known me for years.”

Since May, stronger gold prices have propelled gold miners higher. As of Monday, the proposed offer price valued Acacia at $887.8 million, Barrick said in its statement, which is close to the company’s current market value.

‘Best Outcome’

Some of Barrick’s largest shareholders, who also own Acacia shares, are backing the proposed swap. “The best outcome is a resolution, and the longer they delay that resolution, the longer it continues to destroy value,” Joe Foster, a portfolio manager at VanEck, said Tuesday by phone. “I expect both companies to do what it takes to get a quick resolution.”

Acacia has been seeking to work out some of its issues with Tanzania through international arbitration, which is expected to begin in London in mid-July. Bristow said he doesn’t know if Acacia still plans to proceed with that legal process but said that Tuesday’s news is unrelated.

Bristow’s hope is that Acacia’s board, and at least three-quarters of its minority shareholders, will support a Scheme of Arrangement proposal which would be the most “constructive” way for Barrick to assume 100% ownership. “It’s less costly, less burdensome on everyone, more efficient and much quicker,” he said.

That may appeal to investors who want to move past the dispute so the companies can focus on production. “Generalist investors like us are upset with all the execution issues,” said Simon Jaeger, a portfolio manager at Flossbach von Storch AG, another of Barrick’s top shareholders. “They should get their heads together and solve it as soon as possible.”

--With assistance from Thomas Biesheuvel and Elena Mazneva.

To contact the reporters on this story: Danielle Bochove in Toronto at dbochove1@bloomberg.net;Elena Mazneva in London at emazneva@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, ;Lynn Thomasson at lthomasson@bloomberg.net, Steven Frank, Christine Buurma

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