Will John Paulson Reconsider the Newmont-Goldcorp Merger?



Newmont-Goldcorp merger

After the Newmont Mining (NEM) and Goldcorp (GG) merger was announced, investors were disappointed with the proposed premium announcement by Newmont Mining for Goldcorp’s shares. Goldcorp missed analysts’ earnings expectations for the first three quarters of 2018. During the third-quarter results, the company downgraded its fiscal production and unit cost guidance. Since investors thought the deal was better for Goldcorp than Newmont Mining and it was an all-stock deal, Goldcorp stock rose 7.5% on January 14, while Newmont Mining stock fell 8.9%.

Whereas Goldcorp fell 23% last year, the SPDR Gold Shares ETF (GLD) fell 1.9% and the VanEck Vectors Gold Miners ETF (GDX) fell 9.3%. Newmont Mining stock outperformed its peers and fell 7.6%.

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Condition to reconsider the deal

John Paulson indicated that if the current premium offered to Goldcorp shareholders was eliminated and the Nevada joint venture synergies were preserved only for Newmont shareholders, he could consider the Newmont-Goldcorp merger transaction. As reported by Reuters, Paulson said, “At this level, the transaction would generate value for Newmont shareholders while providing Goldcorp shareholders attractive consideration and an opportunity to participate in the shared upside of the combined company.”

While Goldcorp shareholders are scheduled to vote on the deal on April 4, Newmont shareholders are scheduled to vote on April 11.

Deal or no deal?

According to Reuters, Robert Cohen, the portfolio manager at 1832 Asset Management, said, “I wouldn’t be surprised if the deal does come off the rails. But I don’t think Paulson & Co have enough clout.”

Investors don’t know if the Newmont-Goldcorp merger will go through due to the difficulties. However, the short-term response to a no-deal scenario should be a rise in Newmont Mining’s stock price.


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