Barrick Gold Acquisition of Newmont Mining is DOA

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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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


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8/28/2015 4:00 PM
ABX $7.13 Up +0.29 +4.24%
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