Just a week ago today, Barrick Gold Corp. (NYSE: GOLD) announced an unsolicited offer to acquire rival miner Newmont Mining Corp. (NYSE: NEM) for $18 billion. The all-stock offer was rejected Monday morning by Newmont’s board of directors in a decision that was entirely predictable. Less predictable, perhaps, was Newmont’s counteroffer of a joint venture between the two firms’ Nevada operations.
Maybe Barrick has some deep strategy in mind that mere mortals can’t see, but getting over the twin hurdles of a Newmont shareholder vote and regulatory approval was never terribly likely. Lacking support from Newmont’s board could end Barrick’s on again-off again courtship of Newmont.
Besides, Newmont hated the offer a week ago: “Newmont has previously determined that Barrick’s risk and return profile is inferior on many fronts, including factoring Barrick’s comparatively ineffective operating model, poor track record on delivering shareholder returns and unfavorable jurisdictional risk.” Now that Newmont’s board has had time to look it over, the company hates it even more.
In addition to all the stuff Newmont already hated about Barrick’s offer, there’s this new nugget:
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.
Newmont is referring to Barrick’s recently completed $6 billion all-stock deal acquisition of Randgold Resources. That deal followed a 2015 rejection by Newmont of merger talks with Barrick.
Newmont also has a January $10 billion all-stock offer on the table for Goldcorp Inc. (NYSE: GG) that would create the world’s largest gold miner by production as well as the largest by market cap. That one too may run into regulatory objections, but the two companies’ boards already have agreed to the deal.
Among other things Newmont doesn’t like about Barrick’s hostile offer is a claimed 4% dilution in Newmont’s net asset value.
Newmont’s proposed joint venture would give Barrick 55% of the economic interest in the Nevada operations while the two companies would have equal representation on the management and technical committees. Barrick’s not been interested in similar ventures with Newmont before, so this one may not go anywhere either.
Neither company’s stock made much of a move following the announcement. Barrick traded basically flat at $12.30 in Monday’s premarket session and Newmont traded up about 0.2% at $33.90.