Newmont Mining board rejects Barrick takeover offer, proposes joint venture [UPDATED]
Barrick made an all-stock bid for Newmont last month valued at roughly US$18 billion. Instead, Newmont wants a joint venture
TORONTO – The board of directors of Newmont Mining Corp. unanimously rejected a hostile takeover offer from Barrick Gold Corp. on Monday and countered with a proposal of its own – a new joint venture to operate the two companies’ Nevada assets.
Newmont chief executive Gary Goldberg and Newmont president Tom Palmer, Goldberg’s designated successor, took turns disparaging Barrick’s track record in a conference call with financial analysts.
Goldberg restated his opposition to the all-stock proposal that would result in Newmont shareholders owning about 44 per cent of a Barrick-dominated firm, which would be the world’s biggest gold producer .
“Barrick’s egocentric proposal is designed to transfer value from Newmont shareholders to Barrick’s,” Goldberg said.
He also questioned the experience of Barrick’s new CEO, Mark Bristow, and Barrick’s record in mergers and acquisition under the leadership of John Thornton, who became Barrick’s executive chairman in 2014.
Barrick has said Bristow would be CEO of the combined company. He joined Barrick after it recently acquired Randgold Resources in a friendly all-stock deal.
Goldberg said Barrick is going through a time of great change but added “one of the major factors that hindered Barrick’s ability to create value in the past remains the same . . . John Thornton is still firmly in control of Barrick.”
Palmer said Newmont doesn’t agree with Barrick’s view that the two companies should be combined into one business.
“However, we can still realize the vast majority of the synergies (in) Barrick’s proposal through a JV of Newmont and Barrick’s Nevada-related operations, working together to deliver the potential.”
In a statement Monday, Bristow said Newmont’s Nevada joint venture proposal was “based on the stale and convoluted process that foundered previously.”
“Nevada, with a combined 76 million ounces, will be worth a whole lot more if it is run by one operator,” he said .
“We know we can do that more efficiently than Newmont, and that it will be worth a lot more to both Newmont and Barrick shareholders under that scenario.”
Newmont, which is also in the midst of acquiring Vancouver-based gold miner Goldcorp Inc., says its proposal would realize the available synergies in Nevada while avoiding the risks and complexities associated with Barrick’s proposal.
Under the plan, Barrick would hold a 55 per cent economic interest in the joint venture, while Newmont Goldcorp would hold 45 per cent. On the other hand, Newmont wants equal representation on two key JV management committees.
Newmont also issued fresh estimates for the savings it expects from a combination with Goldcorp, whose shareholders are scheduled to vote on the friendly takeover offer at a meeting on April 4.
It more than tripled its estimate of savings related to the deal compared with its initial expectations for US$100 million per year in savings related to general and administrative costs.
The guidance Monday included an additional US$100 million per year in supply-chain improvements and US$165 million in savings from applying the Newmont practices to the acquired assets.
“To put it all together, Newmont-Goldcorp has identified – to date – a total of $365 million per annum in savings and efficiencies representing value creation potential of over $4.4 billion using the same time frames and discount rates applied by Barrick in their estimates,” Palmer said.
The proposal outlined by Barrick on Feb. 25 said it anticipates US$7 billion of synergies over 20 years if it’s merged with Newmont without completing the Goldcorp merger. About US$5 billion of those efficiencies, or at least $500 million per year, would come from unifying ownership of the Nevada assets..
Palmer – whose future as CEO of Newmont would be in doubt under Barrick’s plan – told analysts that “we simply do not agree that a whole-company transaction is in the best interest of Newmont shareholders.”
“However, we recognize that substantial benefits can and should be realized for both Newmont and Barrick shareholders through the (proposed) Nevada JV.
“There is no reason we shouldn’t be able to find a solution that unlocks the value of our respective Nevada operations for both sets of shareholders,” Palmer said.
Barrick’s all-stock bid for Newmont was valued at roughly US$18 billion when it was announced on Feb. 25.
Barrick shares were at C$16.57 and Goldcorp shares were at C$14.34 at mid-afternoon on the Toronto Stock Exchange. Newmont shares were at US$34.06 on the New York Stock Exchange.