Barrick Gold Corp. (GOLD - Get Report) said Monday that it has made a formal all-share takeover offer for rival Newmont Mining Corp. (NEM - Get Report) that would create the world's biggest gold company.
Barrick said the deal would be based on an exchange ratio of 2.5694 Barrick shares for each Newmont share and would "unlock more than $7 billion net present value (pre-tax) of real synergies." Under terms of the deal, which was made public Monday, Barrick would own 55.9% of the combined company against 44.1% for Newmont investors. Barrick will hold a conference call on the proposal at 8:30 am eastern time.
"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,"said Barrick CEO Mark Bristow.
Newmont said the deal was conditioned on its dropping an all-share takeover of Goldcorp (GG - Get Report) that values its Canadian rival at around $10 billion, a tie-up Newmont said makes more business sense than combining with Barrick.
Newmont shares were down 0.7% Monday and changing hands at $36.24, while Barrick shares fell 1.3% to $12.87.
Newmont jumped 3% on Friday after Canada's Globe & Mail Newspaper reported that Barrick, the world's biggest gold producer and fresh off a $6.1 billion takeover of Randgold Resources, is looking to buy Newmont and dump some of that company's assets to Australia's Newcrest Mining (NCMGY as the bullion industry continues to consolidate.
The merger reports followed a stronger-than-expected fourth quarter earnings report for Newmont late Thursday, which saw the miner post a near 8% increasing in gold production over the three months ending in December that helped it earn $214 million, or 40 cents a share, topping the FactSet consensus 25 cents a share.
Randgold Resources, an Africa-focused miner, agreed to an all-share merger with Barrick in late September that will create one of the world's biggest commodity groups.
Toronto-based Barrick will own around two-thirds of the combined group, with Randgold's Mark Bristow serving as CEO and Barrick's John Thorton keeping his role as executive chairman.
The newly-created group will have a market value of around $18.3 billion, hold five of the world's ten largest bullion deposits and have the ability to produce around 5.5 million ounces of gold each year.
Spot gold prices have risen around 14% since mid-August, outpacing an essentially flat performance for the U.S. dollar index, a benchmark of the greenback against a basket of six global currencies.
Newmont and Goldcorp mined a collective total of 7.9 million ounces of gold last year, the companies said, and will control 75% of proven gold reserves in North and South America, a figure that could trigger scrutiny from anti-trust authorities in either Canada or the Untied States.