Paulson Opposes Newmont-Goldcorp Merger Unless Price Lowered

(Bloomberg) -- Paulson & Co. says it won’t support Newmont Mining Corp.’s proposed $10 billion merger with Goldcorp Inc. unless the terms are changed.

One major concern is that Goldcorp shareholders are effectively receiving the benefits of the recently announced joint venture between Barrick Gold Corp. and Newmont for free, the hedge fund said Thursday in a statement. As a result, Paulson would like to see the price lowered about 23 percent.

“Under the current terms, we are unable to support the transaction,” billionaire John Paulson and hedge fund partner Marcelo Kim said in a letter to Newmont Chief Executive Officer Gary Goldberg that was also sent to Newmont’s board of directors.

“We just received the letter and are evaluating it,” Omar Jabara, a Newmont spokesman, said Thursday by email. The miner has previously said a merger with Goldcorp would create more than $4.4 billion in value. The combined company would be the world’s largest gold miner, with sustainable production of 6 to 7 million ounces a year.

The Wall Street Journal was first to report Paulson’s objections.

Record Date

Newmont investors who held shares as of the Feb. 20 record date will be allowed to vote on the merger on April 11, according to Newmont’s proxy materials. A spokesman for Paulson said the hedge fund acquired 14.2 million shares in 2019 but declined to comment on whether they were purchased before or after the record date.

Goldcorp shareholders are scheduled to vote on the deal April 4. Paulson sold its entire position in Goldcorp in 2019 for the reasons explained in the statement, the spokesman said. According to data compiled by Bloomberg, Paulson held 800,000 shares of Goldcorp at the end of 2018.

Goldcorp fell 2.9 percent to $10.84 at 9:39 a.m. in New York, while Newmont declined 1.7 percent.

Lowest Level

Paulson spearheaded the creation of a coalition of gold investors which has previously criticized the merger because of the compensation it would award senior Goldcorp executives. Other shareholders have also expressed concern about the $12 million retirement package for Goldcorp’s chairman, Ian Telfer, as well as the compensation being paid to outgoing CEO David Garofalo. Goldcorp spokeswoman Christine Mark couldn’t be reached for comment Thursday.

Greenwood Village, Colorado-based Newmont’s offer was made just months after Goldcorp shares hit their lowest level since 2002.

The tie-up was also harshly criticized by Barrick during a hostile bid for Newmont in the past month, which has since been withdrawn in favor of the joint venture between the two companies. Barrick CEO Mark Bristow said he didn’t believe the Newmont-Goldcorp combination created any value and called Goldcorp’s assets “less than attractive.”

Under the current terms, Newmont would create more value by not merging, once the joint venture with Barrick is created, Paulson said. It also flagged “remarkably” divergent fourth-quarter results for both Newmont and Goldcorp, announced after the merger. The premium is “unjustified” given Vancouver-based Goldcorp’s poor performance, the hedge fund said.

“The gold sector is littered with examples of value destructive mergers,” Paulson said in the letter. “We don’t want to see Newmont become another casualty by going forward with this transaction as it is currently structured.”

To contact the reporter on this story: Danielle Bochove in Toronto at dbochove1@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Steven Frank, Joe Ryan

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