By Gustaf Baavhammar, Lukas Bruell (Warwick) 12/10/2018 |
Overview of the deal
Acquirer: Barrick Gold Corporation
Target: Randgold Resources Ltd.
Estimated value: $6.5bn
Announcement date: September 24th 2018
Acquirer Advisors: M. Klein & Co, Morgan Stanley
Target Advisors: CIBC, Barclays
Barrick announced its plans to merge with Randgold in an all-share deal merger for $6.5 billion. Following this, Barrick Gold would effectively own five of the ten tier-one gold assets, thus enabling the new entity “New Barrick” to significantly leverage its market power by having the greatest concentration of tier one assets and the lowest total cash costs of the entire industry. Having announced to create a new gold behemoth with a geographical focus in the Americas and Africa, further speculation arose if Newmont, another leading mining company, and Barrick may restart tie-ups after talks failed in 2014 due to management differences.
The mega-merger comes at a time where the gold industry is struggling to convince investors of its capability to generate enough cash given the fact that Barrick’s production fell from 8 million ounces annually a decade ago to 5.3 million to date. Further pressure on gold prices due to the strong dollar increased even further resulting in a share-price drop of 30% this year. Hence, Barrick aims to counteract that trend by growing inorganically by consolidating two major players.
“Randgold has the agility and swift-footedness of a younger and smaller company, much like Barrick in its early years, while Barrick has the infrastructure and global reach of a large corporate company,” - John L. Thornton, CEO of Barrick
Company details (Barrick Gold Corporation)
Barrick Gold Corporation is the largest gold mining company in the world with operating mines in the US, South America, Africa and Canada.
- Founded in 1983, headquartered in Toronto, Ontario, Canada
- President and CEO: John Lawson Thornton
- Number of employees: 18,421
- Market Cap: 12.91B - EV: 18.752B
- LTM Revenue: 7.72 B - LTM EBITDA: 3.53B
- LTM EV/Revenue: 2.43 - LTM EV/EBITDA: 8.36
Company details (Randgold Resources Ltd)
Randgold is a gold mining business operating mainly in Mali and provides development, exploration of gold and precious metals in Africa.
- Founded in 1995, headquartered in Jersey, Channel Islands
- President and CEO: Mark Bristow
- Number of employees: 11,659
- Market Cap: 6.62B - EV: 6.29B
- LTM Revenue: 1.19B - LTM EBITDA: 519.76M
- LTM EV/Revenue: 5.28 - LTM EV/EBITDA 12.1
Projections and assumptions
Barrick is offering 6.128 of its shares for each Randgold share in an all-share deal, giving Barrick´s shareholders 66.6% with the rest controlled by Barrick´s investors. Both stocks were trading higher after the announcement, with Barrick´s and Randgold´s stocks up by 5.8% and 6.6% respectively as shareholde