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Barrick's Bid for Newmont Faces Challenges

A combination is compelling but not without complications.

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 Barrick Gold (GOLD) formally announced an unsolicited bid for  Newmont Mining (NEM) on Feb. 25. The all-share offer contained no premium at an exchange rate of 2.5694 Barrick shares for each Newmont share. At Barrick’s share price at the time of the announcement, the offer price was roughly $32 per share compared with our $38 fair value estimate for Newmont but roughly within fair value range because of our very high uncertainty rating.

A potential Barrick-Newmont combination is compelling, given Barrick’s estimate of over $7 billion in synergies on a net present value basis. Barrick management said most of these synergies would occur in overlapping Nevada assets.

Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.