Colorado-based miner, Newmont Mining Corporation (Newmont) and Goldcorp Inc. (Goldcorp) have entered into a definitive agreement into which Newmont will acquire all of the outstanding common shares of Goldcorp in a $10 billion stock-for-stock transaction.
Under the terms of the agreement, Newmont is set to acquire each Goldcorp share for 0.3280 of a Newmont share (representing a 17 per cent premium based on the companies’ 20-day volume weighted average share prices as of Friday, January 11, 2019).
The agreement will combine two gold industry leaders into Newmont Goldcorp, with the aim to develop a one-of-a-kind portfolio of operations, projects, exploration opportunities, reserves and people in the gold mining sector.
In announcing the news, Newmont Chief Executive Officer Gary Goldberg, said this combination will create the world’s leading gold business.
“We have a proven strategy and disciplined implementation plan to realise the full value of the combination, including an exceptional pool of talented mining professionals, stable and profitable gold production of six to seven million ounces over a decades-long time horizon, the sector’s largest gold Reserve and Resource base, and a leading project and exploration pipeline,” he said.
Mr Goldberg further stated that Newmont Goldcorp aims to generate up to $100 million in annual pre-tax synergies, with additional cost and efficiency opportunities that will be pursued through their proven Full Potential continuous improvement program.
The combination is expected to be immediately accretive to Newmont’s net asset value and cash flow per share.
“We constantly review opportunities to raise our performance, and this combination represents the most promising path to deliver superior and sustainable value for our shareholders, employees, host countries and communities,” he said.
Newmont Goldcorp’s Reserves and Resources will represent the largest in the gold sector and will be positioned in favourable mining jurisdictions in the Americas, Australia and Ghana – representing approximately 75 per cent, 15 per cent and 10 per cent, respectively.
Newmont Goldcorp will also prioritise project development by returns and risk while targeting $1.0 to 1.5 billion in divestitures over the next two years to optimise gold production at a sustainable, steady-state level of six to seven million ounces annually.
Goldcorp’s President and Chief Executive Officer, David Garofalo added that the combined company’s assets will be centred in the world’s most favourable and prospective mining jurisdictions and gold districts.
“Newmont Goldcorp will be one of Canada’s largest gold producers and will have its North America regional office in Vancouver and expects to oversee more than three million ounces of the combined company’s total annual gold production,” Mr Garofalo commented.
Transaction terms:
- Newmont to acquire all outstanding Goldcorp equity at an exchange ratio of 0.3280 of a Newmont share and $0.02 for each Goldcorp share.
- Goldcorp equity value of $10 billion, with premium, and an enterprise value of $12.5 billion.
- A 17 per cent premium based on Newmont’s and Goldcorp’s 20-day VWAP share prices as of January 11, 2019.
- Newmont and Goldcorp shareholders will own approximately 65 per cent and 35 per cent of the combined entity, respectively.
- The transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporation Act (Ontario).
- The agreement provides for customary deal protection provisions, including mutual non-solicitation covenants and rights to match superior proposals.
- Under certain circumstances, Newmont would be entitled to a $350 million break-fee (3.5 per cent of Goldcorp’s equity value) and Goldcorp would be entitled to a $650 million break-fee (3.5 per cent of Newmont’s equity value).
- Each of Goldcorp’s and Newmont’s directors and certain members of the executive leadership team have entered into voting support agreements agreeing to vote their shares in favour of the transaction.
More information on Newmont Goldcorp can be found here.