Barrick’s bid for Newmont
Today, Barrick Gold (GOLD) made an unsolicited bid for its rival Newmont Mining (NEM) in an all-share deal. According to a press release, this all-share transaction is far superior to Newmont’s proposed acquisition with Goldcorp (GG). Barrick, however, didn’t offer any premium to Newmont’s value and mentioned that at the market-exchange ratio, each shareholder would receive 2.5694 Barrick shares for each Newmont share.
Barrick CEO Mark Bristow said this proposed merger could unlock more than $7 billion in the net present value of real synergies. He added, “The combination of Barrick and Newmont will create what is clearly the world’s best gold company, with the largest portfolio of Tier One gold assets and the highest level of free cash flow.”
Newmont Mining confirmed that it has received an acquisition proposal from Barrick “at a negative premium based on market prices as of the close of business on February 22, 2019.” It also mentioned in a press release that the proposed combination with Goldcorp “represents the best opportunity to create optimal value.” It listed several reasons. The release also said the board will “fully evaluate the Barrick proposal and respond in due course.”
Mergers and acquisitions in the gold space
Mergers and acquisitions in the gold mining space have heated up. Barrick Gold (GOLD) and Randgold Resources announced a merger in September. Also, Pan American Silver (PAAS) announced its $1.07 billion cash-and-stock acquisition of Tahoe Resources (TAHO) in November. On January 14, Newmont proposed a merger with Goldcorp.
Gold miners (GDX) haven’t kept up with broader equities (SPY)(IVV) or gold (GLD), having lost favor with institutional investors after making merger decisions at the peak of the commodity cycle, which resulted in high debt. Moreover, as the world’s economically accessible reserves are dwindling, gold miners (NUGT) need to find more reserves to keep their production pipelines full. So when reserve discoveries slow down, mergers and acquisitions may be miners’ next logical step.