# Randgold Resources Limited and Barrick Gold Corporation agreement on the terms of a recommended share-for-share merger

- Link: https://www.directorstalkinterviews.com/randgold-resources-limited-and-barrick-gold-corporation-agreement-on-the-terms-of-a-recommended-share-for-share-merger/412758897
- Published: 2018-09-24T07:55:46+01:00
- Author: Charlotte Edwards

**Randgold Resources Limited** (LON:RRS) and the boards of Barrick Gold Corporation
today announced that they have reached agreement on the terms of a recommended share-
for-share merger of Barrick and Randgold to create an industry-leading gold company.
It is intended that the Merger will be implemented by means of a court-sanctioned
scheme of arrangement of Randgold and the Randgold Shareholders under Article 125
of the Companies (Jersey) Law 1991, with the entire issued and to be issued share
capital of Randgold being acquired by Barrick.

Under the terms of the Merger, each Randgold Shareholder will receive:

6.1280 New Barrick Shares for each Randgold Share

This exchange ratio  has been agreed based on the volume-weighted average prices
of Barrick Shares traded on NYSE, and Randgold ADSs traded on NASDAQ, respectively,
over the 20 trading days ended on 21 September 2018 (being the last business day
before this announcement).

Following completion of the Merger, Barrick Shareholders will own approximately 
66.6 per cent. and Randgold Shareholders will own approximately 33.4 per cent. of
the New Barrick Group on a fully-diluted basis.

Under the terms of the Merger, Barrick and Randgold have agreed that:

· Randgold Shareholders will be entitled to receive a Randgold dividend for the 
2018 financial year of USD 2.00 per Randgold Share, subject to approval of the Board
of Randgold (the “Randgold Permitted Dividend”). The Randgold Permitted Dividend
is expected to be declared on or before the Effective Date, payable to Randgold 
Shareholders on or around the Effective Date by reference to the Scheme Record Time;
and

· subject to the discretion of the Barrick Board with respect to the declaration
of dividends, Barrick Shareholders will receive a total 2018 annualized dividend
of up to USD 0.14 per Barrick Share. A Barrick quarterly dividend of: (i) up to 
USD 0.03 per Barrick Share will be paid for the three month period ending 30 September
2018; and (ii) up to USD 0.05 per Barrick Share (with a record date prior to the
Effective Date) will be paid for the three month period ending 31 December 2018,
in each case if, as and when declared by the Board of Barrick (together, the “Barrick
Permitted Dividends”).

Following completion of the Merger, Randgold Shareholders will be entitled to receive
and retain any Barrick dividends with a record date after the Effective Date. The
New Barrick Group intends to grow its dividend from the Barrick level for the financial
year ended 31 December 2018 over time, underpinned by stronger cash flow generation,
additional overhead cost savings, asset sale proceeds and lower interest costs.

Further details of the arrangements in respect of dividends are set out in section
3 (Dividends) below.

**Strategic Rationale for the Merger**

The Boards of Barrick and Randgold believe that the Merger will create an industry-
leading gold company with the greatest concentration of Tier One Gold Assets in 
the industry, the lowest total cash cost position among Senior Gold Peers,1 and 
a diversified asset portfolio positioned for growth in many of the world’s most 
prolific gold districts.

Based on Barrick and Randgold’s Closing Prices as of 21 September 2018 (being the
last business day prior to the date of this announcement), the New Barrick Group
will have an aggregate market capitalization of USD 18.3 billion. In addition, based
on the 2017 financial results for both companies, the New Barrick Group would have
generated aggregate revenue of approximately USD 9.7 billion and aggregate Adjusted
EBITDA2 of approximately USD 4.7 billion.

The New Barrick Group will, on completion of the Merger, have the following advantages:

· Ownership of five of the world’s top ten Tier One Gold Assets by total cash cost,
1 with two potential Tier One Gold Assets under development or expansion:

o Tier One Gold Assets: Cortez, Goldstrike, Kibali (45%), Loulo-Gounkoto (80%) and
Pueblo Viejo (60%);

o Potential to become Tier One Gold Assets: Goldrush/Fourmile and Turquoise Ridge(
75%).

· The highest Adjusted EBITDA3 and highest Adjusted EBITDA margin3 and the lowest
total cash cost position among Senior Gold Peers1 on a combined basis based on the
2017 financial results of both companies.

· A proven management team of owners with the ability to operate successfully in
complex jurisdictions.

· Strong cash flow generation to support robust investment and ability to return
cash to shareholders.

· Established partnerships with leading Chinese mining companies.

· Superior scale and the largest gold ‎reserves amongst Senior Gold Peers.

· Strong balance sheet with expected investment grade ratings.

· Ownership of a strategic Copper Business that produced 413 million pounds of copper
in 2017.

· Significant re-rating potential.

Following completion of the Merger, the management team will be tasked with implementing
a business plan that will focus on the following:

**Asset Quality**

· Grow and invest in a portfolio of Tier One Gold Assets and Strategic Assets with
an emphasis on organic growth.

· Sell Non-Core Assets over time in a disciplined manner.

· Invest in exploration across extensive land positions in many of the world’s most
prolific gold districts.

· Maximize the long-term value of a strategic Copper Business.

**Operational Excellence**

· Fully implement a decentralized management ethos with a strong ownership culture.

· Streamline management and operations, and eliminate non-essential costs.

· Leverage innovation and technology to accelerate operational improvement.

· Build trust-based partnerships with host governments and local communities to 
drive shared long-term value.

· Strive for zero harm workplaces.

**Sustainable Profitability**

· Disciplined approach to growth, emphasizing a partnership strategy.

· Increased returns to shareholders driven by focus on return on capital, IRR and
free cash flow per share growth.

**Governance, trading and branding of the New Barrick Group**

The Merger is expected to close by Q1 2019. Following completion of the Merger:

· John L. Thornton, Executive Chairman of Barrick, will become Executive Chairman
of the New Barrick Group.

· Mark Bristow, Chief Executive Officer of Randgold, will become President and Chief
Executive Officer of the New Barrick Group.

· Graham Shuttleworth, Finance Director and Chief Financial Officer of Randgold,
will become Senior Executive Vice President and Chief Financial Officer of the New
Barrick Group.

· Kevin Thomson, Senior Executive Vice President, Strategic Matters of Barrick, 
will become Senior Executive Vice President, Strategic Matters of the New Barrick
Group.

· Two-thirds of the directors of the Board of the New Barrick Group will be initially
appointed by Barrick and one-third will be initially appointed by Randgold.

· Shares in the New Barrick Group issued to Randgold Shareholders will be admitted
to trade on the New York Stock Exchange and the Toronto Stock Exchange, subject 
to the approval or acceptance of each exchange. The listing of Randgold Shares on
the Official List, the trading in Randgold Shares on the main market of the London
Stock Exchange and the trading in Randgold ADSs on NASDAQ will be cancelled.

· The New Barrick Group will operate under the branding of the Barrick Group.

**Randgold Recommendation and Irrevocable Undertakings**

The Board of Randgold, which has been so advised by CIBC and Barclays as to the 
financial terms of the Merger, considers the terms of the Merger to be fair and 
reasonable. In providing its advice, each of CIBC and Barclays has taken into account
the commercial assessments of the directors of Randgold. Accordingly, the Board 
of Randgold intends to recommend to Randgold Shareholders to vote in favour of the
Scheme at the Jersey Court Meeting and the resolutions to be proposed at the Extraordinary
General Meeting as those directors of Randgold who hold Randgold Shares have irrevocably
undertaken to do in respect of their own Randgold Shares (representing approximately
1.06 per cent. of the issued ordinary share capital of Randgold).

**Barrick Recommendation, Voting and Support Agreements and Break Payment**

The issuance of New Barrick Shares under the Merger requires the Barrick Shareholder
Resolution to be approved by a simple majority of the votes cast by Barrick Shareholders
represented in person or by proxy at the Barrick Special Meeting.

The Board of Barrick, which has been advised by M. Klein and Co. and Morgan Stanley
as to the financial terms of the Merger, considers the Exchange Ratio to be fair
and reasonable. The Board of Barrick intends to recommend to Barrick Shareholders
to vote in favour of the Barrick Shareholder Resolution at the Barrick Special Meeting.
The directors of Barrick have agreed to vote their own Barrick Shares (representing
approximately 0.238 per cent. of the Barrick Shares currently in issue) in favour
of the Barrick Shareholder Resolution and the Continuance. In providing its advice,
each of M. Klein and Co. and Morgan Stanley has taken into account the commercial
assessments of the directors of Barrick.

Barrick has agreed to pay to Randgold a break fee payment in the amount of USD 300
million in certain circumstances, as agreed in the Cooperation Agreement and described
further in paragraph 14 below.

**General**

It is intended that the Merger will be implemented by means of a court-sanctioned
scheme of arrangement of Randgold and the Randgold Shareholders under Article 125
of the Companies (Jersey) Law 1991. However, Barrick reserves the right, with the
consent of the Panel and subject to the terms of the Cooperation Agreement, to implement
the Merger by way of a takeover offer (as defined in Article 116 of the Companies(
Jersey) Law 1991), in accordance with the terms of the Cooperation Agreement.

The Merger will be conditional on, among other things: (i) the requisite approvals
of the Randgold Shareholders for the Scheme and the Merger; (ii) the requisite approval
of the Barrick Shareholders for the Barrick Shareholder Resolution at the Barrick
Special Meeting; (iii) relevant regulatory clearances being received and other conditions
satisfied; and (iv) the Jersey Court sanctioning the Scheme and the Merger becoming
effective, no later than the Longstop Date.

It is expected that the Scheme Document, containing further information about the
Merger and notices of the Jersey Court Meeting and Extraordinary General Meeting,
together with the Forms of Proxy, will be mailed to Randgold Shareholders and (for
information only) participants in the Randgold Share Plans as soon as practicable.

It is expected that the Barrick Information Circular, containing further information
about the Merger and notice of the Barrick Special Meeting, will be mailed to Barrick
Shareholders at or around the same time as the Scheme Document. It is also expected
that the Barrick Special Meeting will be held on the same day as the Randgold Meetings,
which will be on or around 5 November 2018. The Scheme is expected to be effective
by Q1 2019, subject to the satisfaction or waiver of all relevant conditions.

Comments

> **Commenting on today’s announcement, John L. Thornton, Executive Chairman of 
> Barrick, said:**
> “The combination of Barrick and Randgold will create a new champion for value 
> creation in the gold mining industry, bringing together the world’s largest collection
> of Tier One Gold Assets, with a proven management team that has consistently delivered
> among the best shareholder returns in the gold sector over the past decade. Our
> overriding measure of success will be the returns we generate and not the number
> of ounces we produce, balancing boldness and prudence to deliver consistent and
> growing returns to our fellow owners, a truly simple but radical and achievable
> concept. There are no premiums in the merger because we strongly believe in the
> opportunity to add significant value for our shareholders from the disciplined
> management of our combined asset base and a focus on truly profitable growth.”
> **Commenting on today’s announcement, Mark Bristow, Chief Executive Officer of
> Randgold Resources, said:**
> “Our industry has been criticised for its short-term focus, undisciplined growth
> and poor returns on invested capital. The merged company will be very different.
> Its goal will be to deliver sector leading returns, and in order to achieve this,
> we will need to take a very critical view of our asset base and how we run our
> business, and be prepared to make tough decisions. By employing a strategy similar
> to the one that proved very successful at Randgold, but on a larger scale, the
> New Barrick Group will leverage some of the world’s best mines and talent to create
> real value for all stakeholders.”

This summary should be read in conjunction with, and is subject to, the full text
of the following announcement (including its Appendices). The Merger will be subject
to the Conditions and certain further terms set out in Appendix 1 and to the full
terms and conditions to be set out in the Scheme Document. Appendix 2 contains the
sources and bases of certain information contained in this summary and the following
announcement. Appendix 3 contains details of the irrevocable undertakings received
by Barrick and voting and support agreements entered into by the directors of Barrick
with Randgold. Appendix 4 contains the definitions of certain terms used in this
summary and the following announcement. Appendix 5 contains a reconciliation of 
certain non-GAAP financial performance measures used in this announcement to the
most directly comparable measure under IFRS.

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