Newmont Dealt Merger Setback -- WSJ
March 23 2019 - 3:02AM
Dow Jones News
Investors concerned about terms of deal, such as chairman's
retirement payment
By Alistair MacDonald and Jacquie McNish
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 23, 2019).
One of Newmont Mining Corp.'s largest investors wants terms of
the Denver-based company's merger with Goldcorp Inc. renegotiated,
in a potential setback for a deal that would create the world's
largest gold miner.
Joe Foster, who runs the VanEck International Investors Gold
Fund, said Friday that the company's $10 billion merger with
Goldcorp transfers away significant gains from a recently announced
Nevada joint venture with Barrick Gold Corp.
On Thursday, activist investor Paulson & Co. expressed
similar concerns about the merger in a letter to Newmont, first
reported by The Wall Street Journal.
Also on Friday, a large Canadian investment fund, the British
Columbia Investment Management Corporation, said that it wouldn't
back the deal because of a significant retirement payment being
made to Goldcorp's chairman. As of its latest portfolio report
issued last year, BCI was a shareholder in Newmont and
Goldcorp.
The January deal had been struck before the Nevada joint venture
was agreed, Mr. Foster said. VanEck owns almost 6% of Newmont,
spread across different funds, making it one of the five largest
holders of the company's stock.
"I don't think that Goldcorp shareholders are entitled to the
synergies of the Newmont Barrick JV," Mr. Foster said. "I don't
want to see the deal abandoned, I just want to see it
modified."
To be sure, the two investors don't have a large enough
shareholding to block the deal on their own. Investors that like
the deal may not wish to see it postponed by renegotiation.
Some analysts have also criticized the deal. Newmont is "giving
away too much value" by issuing so many shares to Goldcorp holders
under the all-share merger deal, says Adam Graf, a mining analyst
with B. Riley FBR.
The two companies expect to generate $365 million through more
efficient mine management but "the synergies will largely accrue to
Goldcorp shareholders," he said.
Still, the deal has fans. Chris Mancini, an analyst with Gabelli
Gold Fund, said that the merger makes sense because Newmont will
generate more value for both companies' shareholders by doing "a
better job than Goldcorp managing their mining assets."
The interventions come during a frenetic period for large gold
mergers. Barrick agreed in September to buy Randgold Resources Ltd.
for $6 billion in an all-share merger. Activist investors are also
increasingly intervening in this sector, as they complain of low
returns and overly lavish executive compensation.
A spokeswoman for Goldcorp declined to comment. Newmont also
declined to comment.
Investors in both companies will vote next month on the deal,
which already has had a turbulent history. Last month, Barrick
offered $17.85 billion for Newmont in an all-share deal that would
have broken up the Newmont-Goldcorp merger. Newmont offered instead
to create a joint venture with Barrick in Nevada to squeeze
billions of dollars of cost savings. The two sides agreed to a
joint venture after investors, such as Mr. Foster, said they
preferred it over a full merger.
Now, Paulson and VanEck say the joint venture should be
reflected in the terms of Newmont's deal with Goldcorp.
Paulson estimated Newmont shareholders would lose about 35% of
the planned Nevada gains to Goldcorp shareholders under the current
merger agreement. The hedge fund said in its letter that the 17%
premium Newmont is offering Goldcorp shareholders and its potential
gains from Nevada are "unjustified" given Goldcorp's record of
"poor performance."
Paulson said in its letter that it owns 14.2 million shares,
which would rank it as one of Newmont's largest shareholders. It is
unclear when Paulson acquired its stake.
Investors have also criticized the size of postdeal compensation
for Goldcorp's current chief executive and its chairman, which
could be as much as 11 million Canadian dollars ($8.2 million) and
C$12 million, respectively, according to the group.
BCI said in statement that the payment to Goldcorp Chairman Ian
Telfer was "misaligned with the interests of shareholders who have
experienced a significant destruction" of shareholder value.
A spokeswoman for Goldcorp has referred to a circular sent to
investors at the time of the deal that said Mr. Telfer's payment
was "on the basis of Mr. Telfer's role as founder and strategic
leader of Goldcorp." Goldcorp has declined to comment further on
compensation.
Write to Alistair MacDonald at alistair.macdonald@wsj.com and
Jacquie McNish at Jacquie.McNish@wsj.com
(END) Dow Jones Newswires
March 23, 2019 02:47 ET (06:47 GMT)
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