Market Overview

Thanks, But No Thanks: Newmont Rejects Barrick's Acquisition Offer

Thanks, But No Thanks: Newmont Rejects Barrick's Acquisition Offer

Gold and copper producer Newmont Mining Corp (NYSE: NEM) responded publicly to Barrick Gold Corp (NYSE: GOLD)'s unsolicited acquisition offer Monday, stating that the proposed terms are not in the best interest of its shareholders.

What Happened

Barrick proposed last month to acquire Newmont in a hostile deal that valued its stock at an 8-percent discount, but would have created the world's largest gold producer. Newmont CEO Gary Goldberg was quoted as saying the deal is both "desperate" and "bizarre" given the hostile nature of the offer, which offers shareholders zero premium.

Newmont issued a press release Monday and an open letter its board addressed to their counterparts at Barrick. Newmont said the offer will reduce shareholder value given the "at market proposal" nature of the deal.

Any upside depends solely on Barrick's execution, which is questionable given the company's recent underperformance due to its "ineffective operating model, poor record on delivering stockholder returns and significant jurisdictional risk," Newmont said. 

Barrick's proposal relies on solid execution from a management team that was put in place just two months ago, Newmont said, adding that the management team lacks relevant experience in managing a global portfolio the size of Barrick.

Why It's Important

Newmont's board unanimously concluded Barrick's offer is inferior compared to its existing plans to combine with Goldcorp Inc. (NYSE: GG).

"Unlike Barrick, Newmont Goldcorp will be centered in the world's most favorable mining jurisdictions and gold districts," Goldberg said in Monday's press release. "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."

What's Next

Newmont remains open to discussing with Barrick ways it can create value in Nevada that do not involve an acquisition, the company said. Newmont proposed that Barrick evaluate a term sheet for a joint venture to combine their Nevada operations and create value for both shareholder groups.

"We are prepared to move forward with you on this basis expeditiously," the company said.

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Photo by Euyasik/Wikimedia. 


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