Barrick, Newmont Race to Plead Merger Cases to Top Investors

(Bloomberg) -- Executives at Barrick Gold Corp. and Newmont Mining Corp. are racing to sway a core group of top investors in both companies to support their own mega-merger over that of their rival.

By next Wednesday, Barrick Chief Executive Officer Mark Bristow said he expects he will have talked with “pretty much every one” of the company's top-10 shareholders. So far those conversations have been “a lot more productive than some of the first meetings in the Randgold-Barrick transaction where we had to do some convincing of the logic of an at-market transaction,” he said Thursday by phone.

Barrick, which acquired Randgold Resources Ltd. this year in a $5.4 billion deal, wants Newmont shareholders including BlackRock Inc., VanEck, and Flossbach von Storch AG to back its no-premium hostile bid for the Colorado-based miner. That could force Newmont to walk away from its $10 billion agreement to buy Goldcorp Inc.

For its part, Newmont has already met with eight of its top 10 shareholders and those meetings have gone “very well,” spokesman Omar Jabara said by phone. The company talked to 45 investing institutions at an industry conference in Florida this week, and will be reaching out to shareholders again in coming weeks.

The top 20 holders in Barrick, who own 55% of total shares outstanding, also hold 91% of Newmont's shares, according to Andrew Cosgrove, an analyst with Bloomberg Intelligence. “So it's clear that Newmont management may have a tough time fighting against shareholders,” were those shareholders to support Barrick, he said.

The winning deal will turn on a few key issues, including added value, cost savings, potential risks and, perhaps above all else, the trust accorded to each executive team. With just over a month left until shareholders of Goldcorp and Newmont vote on their merger, the biggest stockholders are keeping their cards close to the vest. Smaller investors, though, are coming out firing.

Those favoring Barrick cite their faith in Executive Chairman John Thornton and CEO Bristow, pointing to Barrick's merger with Randgold -- which Bristow founded -- as proof the men can add value. “I like the Barrick management team,” said David Neuhauser, managing director of Livermore Partners, which has a small stake in Barrick.

“This would create just a mammoth company, which would provide a lot of liquidity for generalists,” Neuhauser added.

On the other side is James Rasteh, founder of Coast Capital LLC, which holds a small stake in Newmont. “The people who should be calling the shots in a zero premium merger are the better managers, and that's Newmont,” Rasteh said by phone. Bristow's claims of $7 billion in pre-tax synergies may not be “within the bounds of credibility,” he said, adding that Barrick should be paying a premium if it believes its own numbers.

$7 Billion Question

In an updated slide presentation titled “Capturing the Missing Billions,” Barrick argues that synergies “are the premium.” It forecasts over $7 billion in pre-tax savings over 20 years, based on net present value -- $4.7 billion of which will come from Nevada.

Newmont CEO Gary Goldberg has questioned that $7 billion figure, as well as Barrick's tactics, arguing it makes more sense for the two companies to cooperate more closely in Nevada, where they both have mines, including a joint venture, Turquoise Ridge. “You don't need to go through a hostile sort of transaction,” Goldberg said in an interview this week.

But Barrick says attempts to jointly study opportunities have been ‘‘rebuffed'' and more cooperation would be difficult, in part because of “conflicting priorities.''

Newmont offered a different account of the talks on potential cooperation around Nevada projects.

“We've made multiple attempts to do that in good faith but it appears the Nevada synergies may just be the excuse to justify a full-blown hostile takeover,” Jabara said, noting that Goldberg reached out to Barrick on Christmas Eve about a possible joint venture in the state.

Big Investors

Ultimately, it will be the big investors who will have to reach a verdict.

Joe Foster, a fund manager at VanEck, with much more on the line in all three companies, said he's still analyzing the situation. VanEck is Barrick's largest shareholder with 6.3 percent of shares outstanding and the third-largest holder for Newmont with 5.9 percent of shares. It also holds 6.2 percent of Goldcorp.

Paige Hoffman, a spokeswoman for BlackRock, declined to comment. Simon Jaeger of Flossbach von Storch said his company is not yet ready to comment.

Barrick shares have declined 3.4 percent in New York since the deal was announced early Monday, while Newmont has dropped 6.3 percent. As of 12:43 p.m. on Thursday, Newmont was trading 5.4 percent above Barrick's all-share offer, indicating investors believe there may be a higher bid for Newmont in the future or the Barrick deal may not succeed.

Last week, Barrick amassed a small stake in Newmont and used that to submit a proposal to change its rival's bylaws. Specifically, it has “blocked” the ability of Newmont's board to remove a statute that lets 25 percent of shareholders call extraordinary general meetings, Bristow said in the phone interview Thursday. Barrick is also seeking to lower that threshold to 15 percent. “I've just given every shareholder the right to have a say,” he said.

--With assistance from Steven Frank.

To contact the reporters on this story: Danielle Bochove in Toronto at dbochove1@bloomberg.net;Susanne Barton in New York at swalker33@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Steven Frank

©2019 Bloomberg L.P.