Newmont shares (NEM) sink as failed merger talk sparks war of words with Barrick Gold (T.ABX)

Peter Kennedy Peter Kennedy, Stockhouse
1 Comment| April 28, 2014


Shares of Newmont Mining (NYSE:NEM, Stock Forum) fell 6.6% to $24.71 Monday after the U.S. gold mining giant said it had ended merger talks with Toronto-based Barrick Gold Corp. (TSX: T.ABXStock Forum), a move that has subsequently sparked a war of words between the two companies.

Newmont said the two companies have been working hard to find a basis on which they could merge and realize their combined strengths.

But talks broke down because efforts to find consensus over certain “fundamental and strategic issues” have failed, Newmont Chairman Vincent Calarco said in a letter to Barrick co-Chairman John Thornton.

While our team has found your management team’s engagement to be constructive and professional, the same constructive nature cannot be said of our discussions with your Co-Chairman on certain fundamental and structural issues over the past two weeks, Calarco added.

“And as we contemplated further dialogue, we read in continuing reporting of the transaction in the financial press a pointed characterization of our company as “extremely bureaucratic and not shareholder-friendly,’’ Calarco said.

This is a reference to comments made by Barrick Chairman Peter Munk.

Calarco went on to say that “none of this suggests that we have the mutual respect or shared values today that we believe are necessary for the enterprise that would result from the combination of our companies to realize its full potential.

Earlier reports said the companies had agreed to an all-stock merger and Barrick was to offer Newmont shareholders a premium of 13% over the stock's average trading value in the previous 20 days. Reports also said the companies had agreed to all terms except for those related to the spinoff of Australia and New Zealand assets into a separate company.

Published reports say the two companies had hoped to achieve cost savings of up to US$1 billion, mostly flowing from synergies related to their assets in Nevada. Newmont CEO Gary Goldberg was expected to become CEO of the combined company, while Thornton would emerge as Executive Chairman.

Barrick responded to Calarco's comments Monday by saying it had negotiated a term sheet for a proposed merger, which was agreed upon and signed by both parties on April 8.
 
Since then, Barrick said Newmont has sought to renege on three foundational elements of the signed term sheet:
 
  • The location of the merged company in Toronto.
  • The identification of any specific assets that would be included in a spin-off company, and the carefully constructed governance arrangements, particularly with respect to the roles and authority of the Chairman, the Lead Director, and the CEO.

Barrick also said in a statement that both companies were in full agreement that the merger would produce substantial added value for shareholders, through unique synergies that can only be achieved by combining Newmont and Barrick, and the spin-off and further rationalization of certain of the comapanies’ combined assets.

But Newmont later issued a rebuttal saying it did not renege and stronly disagrees with Barrick's characterization of events that folowed. "As previously disocused discussions with the Co-Chairman of Barrick on certain fundamental and strategic issues proved to be unproductive and ageement could not be reached," Newmont said.

Canadian gold mining analyst John Ing said told Stockhouse late last week that he thinks a merger of the two companies will come sooner or later.

“It makes a lot of sense, it’s just a question of when,’’ Ing said.

Barrick is scheduled to hold its annual meeting on Wednesday, an event that will see the company’s 86-year-old Chairman Peter Munk stepping down from his role as Chairman.

Barrick shares eased 2.6% to $19.22.

Tags: GOLD

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Paulschinider12
Barrick Gold was willing to offer Newmont Mining’s shareholders a premium of 13% to Newmont’s average stock price in the last 20 days before the deal, according to people aware of the matter http://goo.gl/jOjDsg
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April 29, 2014
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