Gold and copper producers Goldcorp (GG 10.63, +0.94, +9.70%) and Newmont Mining (NEM 32.67, -2.21, -6.34%) this morning announced a deal whereby Newmont would acquire all of the outstanding common shares of Goldcorp in a stock-for-stock transaction valued at $10 bln.
Under the terms of the agreement, Newmont will acquire each Goldcorp share for 0.3280 of a Newmont share, which represents a 17% premium based on the companies' 20-day volume weighted average share prices (VWAP).
- Further, Newmont will 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 bln, with premium, and enterprise value of $12.5 bln.
- Newmont and Goldcorp shareholders will own approximately 65% and 35% of the combined entity, respectively.
- Under certain circumstances, Newmont would be entitled to a $350 mln break-fee (3.5% of Goldcorp's equity value) and Goldcorp would be entitled to a $650 mln break-fee (3.5% of Newmont's equity value).
Newmont Goldcorp's Reserves and Resources will represent the largest in the gold sector and will be located in favorable mining jurisdictions in the Americas, Australia, and Ghana, representing approximately 75%, 15% and 10%, respectively. Newmont Goldcorp will also prioritize project development by returns and risk, while targeting $1.0-1.5 bln in divestitures during the next two years to optimize gold production at a sustainable, steady-state level of six to seven mln ounces annually.
Following the merger, management of the combined Newmont Goldcorp will feature mining and business leaders at both the Board and executive team levels; specifically, Newmont Goldcorp's management team will be appointed on a "best talent" basis, with Gary Goldberg as Chief Executive Officer and Tom Palmer as President and Chief Operating Officer. As part of a planned and orderly leadership succession process, Mr. Goldberg and Newmont's Board have been engaged in discussions anticipating a CEO succession in early 2019. In October of 2018 the Company also announced Mr. Palmer's promotion to President and Chief Operating Officer.
To ensure a smooth and successful combination, Mr. Goldberg has agreed to lead Newmont Goldcorp through closure of the transaction and integration of the two companies. The Company expects this process to be substantially completed in the fourth quarter of 2019, when Mr. Goldberg plans to retire and Mr. Palmer will become President and Chief Executive Officer.
The two parties expect the deal to close in the second quarter of 2019. Closing of the transaction is subject to approval by the shareholders of both companies; regulatory approvals in a number of jurisdictions including the European Union, Canada, South Korea and Mexico; and other customary closing conditions.