Barrick Gold Corp. has made a formal merger offer for rival Newmont Mining Corp. in an all-stock deal that would combine two of the world’s largest gold producers.
Barrick chief executive Mark Bristow said the proposed merger would unlock more than $7 billion of synergies due in large part to combining the companies’ assets in Nevada.
“Most important, it will enable us to consider our Nevada assets as one complex, which will result in better mine planning and fully realize the state’s enormous geological potential for all stakeholders,” he said in a statement.
Under the zero-premium proposal, Newmont shareholders would receive 2.5694 Barrick shares for each Newmont share they hold.
Based on the closing price at the Toronto Stock Exchange on Friday, the offer would be worth about $44 per Newmont share.
The Toronto-based Barrick said its shareholders would own 55.9 per cent of the combined company and the rest would be owned by shareholders of the Colorado-based Newmont.
Bristow said a Barrick-Newmont deal was “long overdue” and would be “far superior” to Newmont’s proposed acquisition of Goldcorp Inc.
“Considered globally, the merger represents a radical and long-overdue restructuring of the gold industry, and a transformative shift from short-term survival tactics to the long-term creation of sustainable value,” Bristow said.
The possibility of a deal with Newmont comes less than two months after Barrick completed its merger with Randgold Resources that saw Bristow, Randgold’s founder, become chief executive of the combined company.
Barrick said the combined company would match Newmont’s annual dividend of 56 cents per share which, based on the proposed exchange ratio, will represent a pro forma annual dividend of 22 cents per Barrick share compared with Barrick’s current annual dividend of 16 cents per share.