Barrick Gold of Canada to Purchase Randgold for $ 6.5 Billion in Equity Trading

LONDON (Reuters) – Canada's Barrick Gold Corp has agreed to buy Randgold Resources Ltd. in a $ 6.5-billion deal to create the world's largest gold producer under pressure investors use.

The new Barrick Company, which will be listed in New York and Toronto, will hold five of the world's ten cheapest gold mines and will have a market value of $ 19.4 billion based on Monday's trading. That's what would make it the world's largest gold producer in terms of market capitalization, surpassing Newmont Mining Corp, according to Reuters calculations.

This transaction has been the largest in years in the gold mining industry, where investors have criticized companies for mismanaging capital, forcing them to focus on costs while reducing their enthusiasm for acquisitions.

Randgold closed up 6%, making it the biggest gainer of the London Mining Index and puts it at 4.93 billion pounds ($ 6.5 billion). The shares of Barrick, the world's second-largest gold producer, rose 6.3% in the afternoon in Toronto.

"Randgold has the agility and speed of a younger, smaller company, a bit like Barrick in his early years, while Barrick has the infrastructure and global reach of a corporation." big business, "said John Thornton, president of Barrick.

Mark Bristow, Randgold's long-term director, will become the managing director and president of the merged company, taking with him chief financial officer Graham Shuttleworth and the president of Barrick's Thornton, former banker of Goldman Sachs.

Bristow, a 59-year-old geologist, has headed Randgold since its inception in 1995 and is known for his direct and direct approach to managing the company.

The agreement brings together two leaders with different leadership styles and backgrounds.

Two-thirds of the directors of the new Barrick's board of directors will be appointed by Barrick and one-third by Randgold.

"The transaction gives Randgold's shareholders more options for growth and development, whereas previously they had only one growth option in Massawa," said Hunter Hillcoat, a senior analyst at the firm. Investec.

"BAD HAND"

The value of the transaction, at £ 48.5 per share, matched Randgold's market capitalization at Friday's close. This lack of premium for Randgold's shareholders sparked skepticism from some analysts, who also feared that Randgold's agility would be prevented by Barrick's mammoth.

"UK shareholders are probably badly treated by the merger," said Russ Mold, director of investments at AJ Bell.

"What Bristow has to prove now, is that the bigger it is and the better it is the Randgold culture that will possibly win it."

The current price of spot gold does not help the sector, having lost on traditional safe haven flows to the dollar, pushing it back 10% this year.

Barrick and Randgold both lost a third of their market capitalization in the last year before Monday's win.

"We see no reason to change Randgold's approach … If we can not deliver something bigger and better, we will not do it," Bristow said in a conference call with analysts.

Bristow added during another call that the new company would be open to weighing options for its assets in Nevada and Australia, and said there were expressions of interest on the latter. .

The new company will have the highest adjusted earnings before interest, taxes, depreciation and appreciation in the industry and an EBITDA margin of almost 50% based on 2017 figures,

According to the agreement, each Randgold shareholder will receive 6,1280 new Barrick shares for each share of his African rival, said the two companies.

Negotiations on the agreement, which are still subject to regulatory approvals and shareholders and are scheduled to close in the first quarter of 2019, began more than three years ago with advisors in July, told Reuters no one familiar with the negotiations.

In 2017, Barrick and Randgold together produced 6.64 million ounces, while the second largest gold producer, Newmont, produced 5.27 million ounces.

The two companies said they were aligning their strategy with Chinese investors after Barrick said he would do more to attract investors to China.

Randgold, which also operates mines in Mali, Cote d'Ivoire and the Republic of Congo, where it has faced a regulatory risk, a factor with which Barrick's African unit, Acacia Mining, has to deal in Tanzania.

Mr. Klein & Co and Morgan Stanley advised Barrick on the transaction, while CIBC and Barclays were Randgold's financial advisors.