Barrick Gold to buy Randgold Resources in $18.3bn deal

Daniel Fowler
September 25, 2018

In a move that would allow Barrick Gold regain its crown as the world's largest gold producer and tie the company's future more closely to Africa, the Toronto-based miner on Monday announced a US$6 billion plan to purchase Randgold Resources Ltd.

And there's nothing different about Randgold Resources selling up to New York-listed Barrick Gold in an $18.3 billion all-share deal.

"The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry", said Thornton in the statement.

Gold miners earned the ire of investors including billionaire hedge-fund manager John Paulson for entering into bad deals that destroyed shareholder value in the past.

John L. Thornton, executive chairman of Barrick, will become executive chairman of the new Barrick Group; Mark Bristow, CEO of Randgold, will become CEO of the new Barrick Group.

Barrick also said it would reincorporate in British Columbia although Florida-based Thornton did not specify the reasons why.

Both men said they share the same core values, including delivering value to shareholders, rather than focusing on the number of ounces of gold produced. After completion of the deal, Barrick investors will own approximately two-thirds of the company while Randgold shareholders will own the rest. Randgold chief financial officer Graham Shuttleworth will fill the same role at the new entity. On Monday, the mining blog, Inca Kola News, which initially broke the story of the merger, re-posted photos of Bristow, dressed in hunting gear with a rifle, posing next to dead big game animals, including an elephant.

"It does call into question the credibility of the management team, to say one thing and do the opposite", he said.

"The 59-year-old has arguably reached the pinnacle of his career with this deal, yet he will be under considerable pressure to make sure shareholders are not left with an inferior company to a standalone Randgold". A nil-premium merger. No one ever likes them.

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RBC Dominion Securities analyst Stephen Walker was not a fan of the deal either.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "From Randgold's perspective the deal diversifies exposure away from high-risk African markets and towards Barrick's more stable North American assets".

Still, the all-share agreement combines two companies with share prices that had struggled throughout 2018.

"We don't see a reason to change Randgold's approach".

Listed in London, the company faces a wave of potential disruptions. The company has mines in Mali, the DRC, Senegal and Ivory Coast. Randgold discovered more than 30 million ounces of minable gold in a short time.

Barrick's gold production fell to 5.3 million ounces in 2017, from more than 8 million ounces a decade earlier, according to data compiled by Bloomberg. "If we can't deliver something that is bigger and better, then we wouldn't do it", Bristow said on a call with analysts. The shares of both companies climbed.

Shares of both firms have fallen nearly 30% this year, amid falling gold prices and questions over their strategy.

"There's been some very public calls for more consolidation in the sector", said Breichmanas.

While the logic for Barrick to acquire a proven, disciplined operator is clear, the rationale for Randgold to be swallowed by Barrick, whose share price is down 75 per cent since peaking in late 2011, is less obvious.

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