Barrick Gold Corp on Monday pulled its $18 billion offer for Newmont Mining Corp and agreed to form a joint venture in Nevada with its rival, ending a hostile takeover bid that sought to unite the world’s two largest gold producers.
By combining their operations in the southwestern U.S. state, which is home to one of the world’s largest gold-producing areas, Barrick and Newmont hope to save more than $5 billion over the next 20 years.
Toronto-based Barrick will control 61.5 percent of the venture, giving it slightly less oversight than it initially wanted even as it gains full operational control over mines that produce more than 4 million ounces of gold annually.
The agreement comes amid a pickup in deals across the gold industry, which has struggled with a loss of investor confidence and financing constraints in recent years.
“This is one of those rare transactions that really does create demonstrable value for everyone involved,” Barrick Chief Executive Officer Mark Bristow told Reuters on Monday. “It shows that people, if you put your mind to it, can deliver transactions in a very short while.”
Shares of Barrick were up about 0.9 percent at $13.05 on the New York Stock Exchange and up 1.1 percent at C$17.53 on the Toronto Stock Exchange in early afternoon trading. Newmont shares were down 2.3 percent to $32.92 in New York.
Colorado-based Newmont rejected Barrick’s all-stock zero-premium hostile takeover, which was launched last month, and proposed instead the Nevada joint venture, which both companies have tried to form for years.
The deal seems to wash away, for now, vestiges of a long-simmering feud between the companies. Bristow, on the same day Barrick launched its bid, called Newmont CEO Gary Goldberg a “loser” in a Reuters interview.
Goldberg, for his part, had told Reuters that Bristow’s “credibility and experience” and performance at Randgold, which Bristow had led until two months ago when it was acquired by Barrick, was “anemic.”
Yet both men flew to Nevada on Monday to announce the deal, a step designed to underscore collaboration. Even the companies’ social media accounts played nice: Barrick’s Twitter profile “liked” Newmont’s announcement of the Nevada JV.
As part of Monday’s agreement, Barrick will also withdraw several shareholder proposals for Newmont’s annual meeting later this year.
“Through this joint venture, the whole is going to be worth a lot more than the sum of its parts,” said Newmont Chief Operating Officer Tom Palmer, who will take over as CEO when Goldberg retires at the end of 2019.
Newmont and Barrick share many investors, and some had been unenthusiastic about the hostile takeover bid.
The VanEck International Investors Gold Fund, the largest Barrick shareholder and one of the top three in Newmont, urged the companies last week to focus on the Nevada venture and expressed skepticism about a full takeover of Newmont.
BACK TO THE TABLE
Newmont can now move forward on its own planned takeover of Canada’s Goldcorp Inc, a deal that will help it leapfrog Barrick to become the world’s largest gold producer.
Barrick and Newmont had discussed a 50-50 joint venture in Nevada late last year but could not agree on who would control it, according to sources familiar with the matter. Newmont then turned its attention to the Goldcorp deal, and in the eyes of Barrick executives, put off the Nevada talks for months, sources said.
Barrick’s hostile offer brought Newmont executives back to the table. The joint venture Newmont proposed early this month, in which it would control 45 percent and Barrick 55 percent, was a starting point for renewed talks that were serious for the first time in decades. Bristow responded in press interviews that he wanted closer to 66 percent control.
Now focused on the joint venture, Goldberg and Bristow met in New York last Tuesday, and again in Toronto two days later, sources said. The companies’ boards agreed to the deal over the weekend, and both management teams traveled to Elko, Nevada, for Monday’s announcement.
The deal will lead to cuts at the oversight level but not in operations, although the number of reductions is yet to be determined, Bristow said.