Barrick Gold (GOLD, $13.35 ) makes $18 billion bid for Newmont Mining (NEM, $36.48), to create world's biggest gold company
On Monday, Barrick Gold Corp. announced its formal bid for acquiring Newmont Mining Corp. to create the world’s largest gold mining company.
Barrick Gold’s proposed merger would be an all-share deal of close to $18 billion, involving an exchange ratio of 2.5694 Barrick shares for each Newmont share. According to Barrick CEO Mark Bristow, the merger would lead to the unlocking of $7 billion net present value in real synergies. Barrick views the two firms’ combined assets in Nevada to be a major potential driver of value for the proposed combined entity.
If the merger goes through, Barrick would own 55.9% stake in the combined company, while Newmont investors would hold 44.1%. The combined company might offer Newmont's annual dividend of 56 cents per share to shareholders. According to Barrick, the merger if approved would lead to an estimated 14% increase in Newmont's current net asset value per share.
Bristow is apparently hoping that the deal would not only result in creating the world’s “best gold company”, but also boost the overall gold industry’s prospects. "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. Since 2013, gold futures have hardly been able to push past the price range of $1,000 to $1,400 per ounce.
This is not the only instance in recent times of Barrick apparently trying to concentrate its position in the market for gold. Last month, Barrick bought rival Randgold Resources for $6.1 billion.
