LONDON – Barrick Gold Corp. offered $17.85 billion for Newmont Mining Corp., proposing an unsolicited, all-share deal that would combine the world’s biggest gold miners and create an industry giant that Barrick, based in Toronto, said will be better able to squeeze out costs.
Gary Goldberg, Newmont’s chief executive, told The Wall Street Journal that his company would focus on completing its own big deal, a $10 billion proposed acquisition of Canadian miner Goldcorp Inc. Barrick didn’t offer a premium to Newmont’s share price.
Investors have been betting on Barrick making a higher offer. Shares in Denver-based Newmont, ended up 3 percent on Friday after Barrick first said it was considering such an all-stock, no premium offer. In premarket trading Monday, they were up another 1.45 percent.
The offer sets up a showdown between management teams at two of the mining industry’s fiercest rivals. Barrick has long considered merging with Newmont, America’s largest listed miner, to pair up their large gold-mining operations in Nevada and create an industry giant that would dwarf the nearest competitor. A combination would create a behemoth worth about $42 billion at today’s valuations. Barrick said Monday it would create opportunities to squeeze out over $7 billion in cost savings.
The last serious attempt at a deal faltered in 2014. Barrick’s renewed interest in its rival reflects heightened pressure to rein in costs for ore extraction and production as gold prices languish and ore reserves shrink.
The bid comes just months after Barrick sealed a $6 billion, all-stock deal with Randgold Resources, an African-focused miner. Randgold Chief Executive Mark Bristow took the top job at Barrick after the combination, a deal orchestrated by Barrick Chairman John Thornton, a former Goldman Sachs banker who has spent the past few years squeezing costs and selling assets.
That effort though has hobbled Barrick’s gold output, which has fallen sharply in recent years.
Newmont’s proposed combination with Goldcorp would put it slightly ahead of Barrick in terms of production. A spokesman for Newmont said Sunday that the Goldcorp tie-up “will create an unmatched portfolio of world-class operations, projects, reserves, exploration opportunities, and talent.”
Barrick said it would offer 2.5694 of its shares for each Newmont share, valuing Newmont at $17.85 billion. Barrick based its offer on Newmont’s share price before the recent spike following reports that the Toronto-based company would propose this deal.
Barrick would also have to pay a $650 million breakup fee to Goldcorp for ending their deal, eating into any synergies.
“This merger will be a huge winner... there are huge, multibillion-dollar, synergies,” said Seymour Schulich, a Canadian entrepreneur who currently holds around 0.6 percent of Barrick.