Barrick Gold Acquisition of Newmont Mining is DOA

Comments by gold miner's retiring co-chairman kills any chance the two can reach an agreement

Apr 30, 2014 at 12:00PM

Barrick Gold (NYSE:ABX) must wish company founder and outgoing chairman Peter Munk was gone already. Having presided over a series of missteps the past few years that laid waste to the gold miner's stock -- it's lost two thirds of its value from the highs it hit in 2011 -- he's apparently heaped one final indignity upon investors before turning the reins over to co-chairman John Thornton tomorrow by disparaging the management team at Newmont Mining (NYSE:NEM).

In what can only at best charitably be described as unhelpful at a time when Barrick was trying to acquire Newmont, Munk lashed out at his rival's team in an interview saying they were "extremely bureaucratic and not shareholder-friendly." 

It was a curious way to pursue a harmonious merger that had me thinking the outburst was born of frustration at not being able to complete the deal before his tenure was up. But it's clear his comments have poisoned the well, maybe irreparably so, as Newmont publicly issued a letter to Barrick's board yesterday saying the merger is off for good.

Saying it thought the two management teams were operating from a place of mutual respect, Newmont said that was apparently not the case, and because it is concerned for the welfare of its shareholders, it's decided "to unanimously conclude that we need to put aside our attempts to resuscitate this initiative and should pursue our course as an independent company." In short, the merger deal is dead and buried.

Surprisingly, rather than offer a mea culpa, Barrick doubled down on Munk's statements and issued a "clarification" placing blame for the failure to reach an agreement squarely at the feet of Newmont. It cited three areas of its rival's apparent intransigence that were the cause of the failure because Newmont tried to backtrack on them:

  • the location of the head office of the merged company in Toronto
  • the identification of any specific assets that would be included in a spin-off company
  • "the carefully constructed governance arrangements, particularly with respect to the roles and authority of the Chairman, the Lead Director and the CEO."

In a bit of tit-for-tat press release sniping, Newmont countered in a followup statement saying it didn't renege on any of the points, but rather found negotiating with Munk "unproductive."

So depending upon which side of the argument you fall on, Munk was either right to chastise his rival's team because, after having come so far, Newmont changed the framework, or you think Newmont was up against an ornery Munk who was impossible to deal with. 

It would seem, even if Newmont impolitically did change its mind after having agreed to a deal, publicly airing dirty laundry as Munk did ensured talks couldn't be revived. Admittedly,finding the rug pulled out from under you when you think you have an agreement is frustrating, but churlishly acting out by engaging in name-calling does nothing to advance the discussions and bring Newmont back to the table.

As it is, investors can conclude this deal is done for the time being, and it will likely be some time before the two can try to come back to the table again. At that point Peter Munk will be long since retired, and perhaps cooler heads can prevail.

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A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

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I love the exercise, because it makes you think about what's important and forces you to be succinct.

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Everything else is details. 

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