US-based gold and copper producer Newmont Mining has announced that its $10bn acquisition of Canadian gold miner Goldcorp is being opposed by Paulson & Co., a holder of 14.2 million shares of the US-based firm.
In a letter to Newmont Mining president and CEO Gary Goldberg, Paulson, which is an investment management company, indicated that it does not support the proposed acquisition of Goldcorp in its current structure.
Paulson said that as per the present terms, the all-stock deal creates negative value for Newmont Mining’s shareholders. Furthermore, the investment management company said that the $1.5bn premium to Goldcorp’s shareholders is not justified due to the Canadian firm’s “poor performance”, marked by a decline in production by 2% and drop in EBITDA by 27% as per its fourth quarter 2018 results.
Paulson claimed that as per the current structure of the transaction, the resulting synergies would accrue only to Goldcorp’s shareholders.
It also argued that a significant percentage of value created by Newmont Mining’s recently signed Nevada joint venture with Barrick Gold will go to Goldcorp’s shareholders rather than being preserved for Newmont Mining’s shareholders.
Paulson believes that Newmont Mining is in a position to create greater value as an independent company following the creation of the Nevada joint venture compared to the merger with Goldcorp if completed under current terms.
However, Paulson said that it will reconsider its stand on the proposed transaction if the merger exchange ratio is brought down from 0.328 shares to a maximum of 0.254 shares.
The investment management company said that at its recommended merger exchange ratio, the deal would create value for Newmont Mining’s shareholders. It also said that Goldcorp’s shareholders at the ratio level will still get attractive consideration along with scope to take part in the shared upside of the combined company.
The proposed merger was announced in January 2019 with an objective to form a leading gold company in the world, which would go by the name Newmont Goldcorp. The combined company is expected by the concerned parties to have a steady, profitable gold production targeting 6-7 million ounces over a decades-long time horizon.
About two months after the announcement of the deal, Newmont Mining was offered an $18bn merger proposal from Barrick Gold. The proposal from the Canadian gold mining giant was turned down though by Newmont Mining on grounds that it was not in the best interests of the company’s shareholders.
Subsequently, Newmont Mining and Barrick Gold settled down to sign a joint venture agreement to combine their Nevada gold operations in order to unlock synergies worth $5bn.