Barrick’s hostile bid for Newmont
On February 25, Barrick Gold (GOLD) put in an unsolicited bid to acquire Newmont Mining (NEM), which did not offer any premium to its stock price. Barrick CEO Mark Bristow said this proposed merger could unlock more than $7 billion in the net present value of real synergies. Barrick’s offer also included Newmont ditching its efforts to combine with Goldcorp (GG). On March 4, Newmont rejected the bid saying that Barrick’s unsolicited negative premium proposal is not in shareholders’ best interest. It believes that the combination with Goldcorp is significantly more accretive to Newmont’s shareholders on all relevant metrics compared to Barrick’s proposal.
Goldcorp supports NEM’s joint venture with GOLD
On March 11, Barrick ended the hostile bid and announced the joint venture with NEM in Nevada. In a press release, Goldcorp said that it supports the announced joint venture of Barrick and Newmont, which now clears the road for Newmont and Goldcorp’s merger.
Gold miners and mergers
Over the last few years, gold miners (GDX) haven’t kept up with broader equities (SPY) (IVV) or gold (GLD). They have also lost favor with institutional investors mainly due to their merger decisions at the peak of the commodity cycle, which resulted in huge write-downs and huge debt piles. 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.
You can also read Could the Newmont-Goldcorp Merger Form ‘The Go-To Gold Equity’? for more details on the merger between Newmont and Goldcorp.