Barrick Gold Corp. is one step closer to closing its biggest acquisition in seven years with shareholders voting overwhelmingly in favour of its $6-billion (U.S.) takeover of Randgold Resources Ltd.
On Monday, roughly 99 per cent of shareholders voted in favour of its zero-premium, all-stock purchase of Jersey-based Randgold, which operates in Africa.
Unlike Barrick’s $7.3-billion purchase of copper miner Equinox Minerals Ltd. in 2011, which was blamed for destroying billions in shareholder value, this deal has been warmly welcomed by shareholders on both sides since it was announced in late September.
Barrick and Randgold have one final hurdle to clear before the deal can close, with Randgold shareholders holding their vote on the transaction on Wednesday.
With the purchase of Randgold, Toronto-based Barrick is once again poised to become the undisputed heavyweight in the global gold industry in terms of market capitalization, production and reserves.
In remarks to shareholders at the meeting in Toronto on Monday, John Thornton, Barrick’s executive chairman, said the two senior gold companies shared a similar cultural ethos, which was one of the main rationales for the transaction.
“Barrick and Randgold are cut from a single cloth,” said Mr. Thornton, which is based on a decentralized, partnership-based, owner-centric business model.
Mark Bristow, Randgold’s founder, and incoming chief executive of Barrick, says he modelled Randgold on Barrick’s early years, under founder Peter Munk and Bob Smith, when it was lean and entrepreneurial. Mr. Thornton meantime said that Barrick has been spending the past 4½ years trying to recover that early 1980s spirit after becoming bloated and bureaucratic.
Despite the apparent meeting of the minds between Mr. Bristow and Mr. Thornton, the Barrick-Randgold tie-up was years in the making and took on various shapes at different points in time.
In 2015 when the two executives first met, Mr. Bristow proposed to Mr. Thornton that Barrick buy Randgold at a premium. But Mr. Thornton thought it was a bad idea.
“I told him it’s crazy," said Mr. Thornton. "We’re not doing that.”
In 2015, Barrick was mired in about US$13-billion in debt after taking billions in writedowns from both the Equinox acquisition and shutting down construction on a South American mine that never saw the light of day. With Barrick’s share price in the dumps, the idea of paying a premium for Randgold, which was already an expensive stock, was a non-starter.
“You may know the industry very well,” Mr. Thornton told Mr. Bristow during that first meeting. “I grew up in the M&A business. What you’re proposing makes zero sense.”
However, earlier this year, with Barrick’s balance sheet in much better shape, the two executives started talking again, with the prospect of a transaction suddenly far more likely this time. Mr. Thornton said that Barrick considered selling its “difficult” assets, including various holdings in Africa and South America, to Randgold but neither side could agree on acceptable terms.
Mr. Thornton also said on Monday that Barrick is not in talks with Newmont Mining Corp. about combining operations in Nevada. A Reuters report had said the two giant mining companies were talking about a joint venture. Barrick and Colorado-based Newmont discussed a merger in 2014, but the companies were unable to complete the deal.