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Barrick proposal to acquire Newmont hits roadblock: sources

Peter Munk, founder and chairman of Barrick Gold Corp, attends a news conference in Toronto in this file photo taken January 16, 2009. REUTE
Peter Munk, founder and chairman of Barrick Gold Corp, attends a news conference in Toronto in this file photo taken January 16, 2009. REUTE

By Euan Rocha

TORONTO (Reuters) - Talks between Barrick Gold Corp and Newmont Mining Corp about a potential merger have hit a snag, but sources close to the situation say the companies remain keen to reach a deal and discussions are likely to resume.

The talks had been on for a few weeks, and the two sides had broadly agreed to a transaction under which Toronto-based Barrick would acquire Denver-based Newmont in an all-stock deal, said one source close to the matter.

That source said the deal would offer Newmont shareholders a slight premium to its current share price. Newmont shares were more than 7 percent higher at $25.28 in early trading on the New York Stock Exchange, while Barrick's New York-listed shares were

largely unchanged at $18.01.

The sources, who asked not to be named due to the sensitive nature of the situation, said the talks have stalled over the issue of the spin-out of some assets from the combined entity, which is among the hurdles to a deal.

After the close of a tentative deal, shareholders in the combined entity would also get shares in a new company that is likely to include assets in Australia and New Zealand. But the two companies have not yet agreed on a final mix of assets in the spun-out entity, said one source, adding that the new entity could include some assets from outside that region.

The companies are also contemplating selling some non-core assets not included in the spun-out new entity, said one source.

Barrick and Newmont declined to comment on the matter.

Sources said the two companies had hoped to complete a deal this month ahead of the annual shareholder meetings of both companies, but that timetable was now looking unlikely.

Newmont's annual general meeting is set for April 23, while Barrick's is being held on April 30.

The latest round of merger talks between the two companies, initially reported by the Wall Street Journal, mark the third time that the two miners with large overlapping operations in Nevada have contemplated a merger within the last seven years.

Sources familiar with the discussions said talks between the two sides had fallen apart in the past, largely due to personality issues.

Analysts and some investors have long thought a deal, particularly involving their big operations in Nevada, was logical from a cost-cutting perspective.

The sources said combining the mining giants' operations could lead to nearly $1 billion in annual cost savings with nearly half of those savings coming from reducing overlap in Nevada.

"To the extent that a combination improved free cashflows and the ability to service combined debt, we suspect investors would welcome the deal," JPMorgan analyst John Bridges said in a note to clients. "Especially, if the new company was able to use the opportunity to do serious surgery to non-contributing assets."

Under the most recent deal being considered, the combined company would be headquartered in Toronto. But the new combined entity would still retain a big operational presence in Denver, said one source.

As earlier reported by Bloomberg News, the sources said Gary Goldberg, Newmont's chief executive, would become CEO of the new combined entity with Barrick's CEO Jamie Sokalsky bowing out. Sokalsky has worked for Barrick for over two decades. He served as its longtime chief financial officer before being named CEO in 2012.

John Thornton, the ordained successor to Barrick's founder and outgoing chairman, Peter Munk, would become chairman of the new combined entity and head a board comprised of a mix of directors from both companies and possibly some outsiders.

(Additional reporting by Allison Martell Editing by Jeffrey Hodgson, Frank McGurty and Paul Simao)

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