The board made the unanimous decision to refuse the US$18-billion offer as the proposal, “presents significant risks to Newmont shareholders,” and is not in their best interest.
Newmont will instead move ahead with its deal to acquire Goldcorp (TSX:G,NYSE:GG) for US$10 billion, an equally massive deal.
“Our thorough review of Barrick’s unsolicited proposal and its associated risks has reaffirmed our conclusion that the combination of Newmont and Goldcorp represents the best opportunity to create value for Newmont’s shareholders and deliver industry-leading returns for decades to come,” Gary Goldberg, Newmont’s CEO, said in the announcement.
The location of Goldcorp’s assets and the jurisdictions they lie in are considered more favorable and less risky by the Newmont board.
Goldberg added, “unlike Barrick, Newmont Goldcorp will be centered in the world’s most favorable mining jurisdictions and gold districts. The combination with Goldcorp is significantly more accretive to Newmont’s shareholders on all relevant metrics compared to Barrick’s proposal, even when factoring in Barrick’s own synergy estimates.”
He concluded that the takeover proposal was far too reliant on precarious factors.
“Realizing value through Barrick’s proposal for Newmont’s shareholders hinges entirely on a new management team that lacks global operating experience and is only two months into its own transformational integration.”
While a merger may not be in the future for Barrick and Newmont, the latter has submitted a joint venture proposal to combine the Nevada assets of Newmont Goldcorp with Barrick’s for a cost-savings strategy that could potential generate billions of dollars.
“Newmont has consistently expressed to Barrick that we are open to a joint venture for our operations in Nevada,” added Goldberg.
“This proposal would enable both companies’ shareholders to realize the available synergies while avoiding the significant risks and complexities associated with Barrick’s unsolicited proposal.”
In response to the JV offer, Barrick’s CEO and President Mark Bristow called the idea “stale and convoluted,” noting both companies’ Nevada-based assets would offer more value if operated by one company.
“Nevada, with a combined 76 million ounces, will be worth a whole lot more if it is run by one operator. 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,” Bristow said in the press release.
Newmont shares were up 1.86 percent Monday (March 3), trading at US$34.45. Barrick’s shares were also up 1.65 percent to C$16.62.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.