Canada’s Goldcorp Inc. is being swallowed by United States gold major Newmont Mining Corporation in a friendly all-stock acquisition valued at $10-billion. This is the second huge M&A deal in the global gold sector in the past few months. Barrick Gold Corp. closed its US$6-billion acquisition of Randgold Resources Ltd only a few weeks ago.
The Globe and Mail reported on Friday that Goldcorp was in talks with Newmont as it explored strategic options with its stock trading at a 17-year low. Goldcorp also talked to Australian gold major Newcrest Mining before Christmas about a deal but those talks fell apart.
Goldcorp shareholders will receive 0.328 of a Newmont share for their stock. The 17-per-cent premium being paid is low compared to similar sized acquisitions on a historical basis. When the gold price was trading at much higher levels, takeover premiums in the 30 to 40 per cent range were common in the industry.
But Barrick Gold recently broke the mold by announcing a no-premium acquisition of Randgold, which was welcomed by shareholders as a sensible solution in a difficult market.
In a press release, Newmont said the combination with Goldcorp will generate $100-million a year in cost savings. Vancouver-based Goldcorp’s stock has been stuck in a tailspin as it has dealt with a slew of operational issues over the past few years, including gold grade challenges at some of its biggest mines.