Barrick Gold’s Proposed $17.85bn Acquisition of Newmont Mining

By Marcus Falck, Carlos Asorey, Oscar Kock and Steven Skomra (SSE & Georgetown University) - Date: 06/03/2019

Overview of the deal

  • Acquirer: Barrick Gold Corporation (NYSE: GOLD) - Advisors: NA

  • Target: Newmont Mining Corporation (NYSE: NEM) - Advisors: NA

  • Estimated value: $17.85bn

  • Announcement date: Proposed February 25, 2019

Barrick Gold’s announcement of a proposed acquisition of Newmont Mining on February 25, 2019 was an initial surprise to investors as the announcement came just a few months after Barrick completed its $6bn acquisition of Randgold Corporation. The proposed unsolicited, hostile bid offers $17.85bn for Newmont in an all share, nil premium transaction of 2.5694 Barrick shares for each outstanding Newmont share. This values Newmont at approximately $33.50 per share, which is below its current trading price. If completed, the combined entity would be valued at over $42bn in market cap, hold 141 million ounces of total gold reserves, and have annual operating cash flows of about $5bn making it a gold mining giant.

Following completion, Barrick shareholders would hold 55.9% of the merged company while Newmont shareholders would hold approximately 44.1%. There could be significant investor backing behind the acquisition since the top 20 shareholders in Barrick, who hold a combined 55% stake, also hold a combined 91% stake in Newmont. Barrick’s CEO maintains that the focus of the acquisition is to aim to eliminate overlapping operational costs in both companies’ gold mines located in Nevada by combining tasks such as ore transportation and processing. Barrick hopes the move could help prevent Newmont’s agreement to acquire Goldcorp Inc., which if completed would put Newmont slightly ahead of Barrick in production output. While there have been talks of these companies merging in the past, management teams have historically been unable to strike a deal.

"The combination of Barrick and Newmont will create what is clearly the world's best gold company, with the largest portfolio of Tier One gold assets and the highest level of free cash flow to drive future growth and support sustainable shareholder returns, run by a management team with an unparalleled record of delivering value." - Mark Bristow, Barrick CEO

Company Details (Johnson and Johnson)

- Founded in 1983, headquartered in Toronto, Ontario, Canada

- President and CEO: Mark Bristow

- Number of employees: 18,421

- Market Cap: $21.86bn EV: $27.82bn

- LTM Revenue: $7.24bn - LTM EBITDA: $3.05bn

- LTM EV/Revenue: 3.84x - LTM EV/EBITDA: 9.12x

Barrick Gold Corporation is the largest gold mining company in the world with operations in over 15 different countries including the US, South America, Africa, and Canada.

Company Details (Auris Health)

- Founded in 1921, headquartered in Greenwood Village, Colorado, USA.

- President and CEO: Gary Goldberg

- Number of employees: 12,569

- Market Cap: $18.20bn - EV: $19.81bn

- LTM Revenue: $7.25bn - LTM EBITDA: $2.31bn

- LTM EV/Revenue: 2.73x - LTM EV/EBITDA: 8.58x

Newmont Mining Corporation is a mining company focused on the production and exploration for gold and copper. The company primarily produces gold with operations throughout North America, South America, Australia, and Africa.

Projections and Assumptions

Short term consequences

Rumors of a combined Barrick and Newmont have been circulating for years, including as recently as 2014. What has occurred is instead a heavy rivalry of who is the largest; the Barrick/Randgold mer