Toronto — Barrick Gold is withdrawing its $17.8bn hostile takeover bid for Newmont Mining, with the companies opting instead to forge a joint venture around their Nevada projects.
The change came weeks after Barrick proposed an offer that would have created the world’s largest gold producer. After Newmont’s board rejected Barrick’s bid to buy Newmont in an all-share deal, Newmont CEO Gary Goldberg proposed the joint venture as an alternative both companies could gain from.
Barrick’s decision ends two weeks of animosity between the two largest gold producers, helping Newmont focus on securing shareholder approval for its offer to buy Goldcorp. Newmont raised doubts about the Barrick bid proposal from the start, saying its previously announced agreement to take over Goldcorp offered better benefits.
“We listened to our shareholders and agreed with them that this was the best way to realise the enormous potential of the Nevada goldfields’ unequalled mineral endowment, and to maximise the returns from our operations there,” Barrick CEO Mark Bristow said in a statement Monday.
Newmont rose 17c to $33.88 in pre-market trading in New York. Barrick gained 2.4% to $13.24.
Even after more than a century and a half of exploration, Barrick and Newmont said in 2014 that there was plenty of hidden gold still to be uncovered in Nevada, which already accounted for a third of their output then and produced more of the metal than SA and Chile combined.
“This isn’t about personalities,.” Goldberg said in a telephone interview Monday. “This is about working together and delivering on behalf of,all of our stakeholders. So that’s it for the relationship talk.”
Bristow had noted that the bulk of the $7bn synergies he envisioned from Barrick’s merger with Newmont would come from the two companies’ projects in Nevada. Goldberg had offered a joint venture in those projects instead, saying Barrick could take a 55% stake, leaving Newmont the rest.
“We want these companies to really focus on realising these synergies,” said Simon Jaeger, a portfolio manager at Flossbach von Storch, one of the top five shareholders of both companies. “We weren’t focused too much on the format. We were not in favour of the merger or a big transaction or a JV per se.”
The hostile bid strengthened Barrick’s position. When the joint venture was finally announced, the Toronto-based miner got a 61.5% stake, leaving Newmont with just 38.5%.
The decision by Barrick to withdraw its bid comes after rhetoric escalated into an ugly brawl between the two gold giants, with each side calling the other “desperate.” Newmont said its previously announced agreement to take over Goldcorp Inc. offered better benefits. Barrick CEO Bristow said his team could do a better job running his rival.
The gold industry’s largest producers are on a deal-making spree after languishing bullion prices the past few years squeezed margins and spurred a search for higher quality mines. Companies such as Barrick are trying to boost reserves of the precious metal or win operational savings.
In September, industry leader Barrick agreed to buy Randgold Resources for $5.4bn. Three months later, Newmont announced its plan to purchase Goldcorp for $10bn, which would leapfrog it into the leading gold-producer spot.
With assistance from Justina Vasquez
Bloomberg
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