Miner Barrick agrees to buy Randgold to create $18bn gold giant

Canadian mining giant Barrick Gold agreed Monday to buy Africa-focused rival Randgold Resources to create a global industry champion worth $18.3 billion.

The blockbuster all-share deal was described as a merger but is effectively a takeover because Barrick investors will own a majority 66.6-percent stake. Randgold shareholders will hold the rest.

The enlarged company, keeping the Barrick name, will be traded in New York and Toronto. Randgold's London listing will be cancelled.

The group will have a combined stock market capitalisation of $18.3 billion (15.6 billion euros) and annual revenues of approximately $9.7 billion.

"The boards of Barrick Gold Corporation and Randgold Resources Limited are pleased to announce that they have reached agreement on the terms of a recommended share-for-share merger ... to create an industry-leading gold company," read the statement.

Barrick executive chairman John L. Thornton will take up the same role at the new company, while Randgold chief executive Mark Bristow will retain his CEO position.

New champion

"The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry," said Thornton in the statement.

He added that the gigantic deal would bring "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".

Bristow acknowledged that the industry has long been criticised for its "short-term focus, undisciplined growth and poor returns".

He added: "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."

Randgold shareholders will receive 6.1280 new Barrick shares for every Randgold share under the terms of the deal.

Randgold has operations in Mali, Senegal, the Democratic Republic of Congo and Ivory Coast.

'Struck gold'

"Mr Bristow has struck gold, in a sense, as he now becomes the boss of the world's biggest gold miner," said AJ Bell investment director Russ Mould.

"The 59-year-old has arguably reached the pinnacle of his career with this deal, yet he will be under considerable pressure to make sure shareholders are not left with an inferior company to a standalone Randgold."

Monday's news sent Randgold's share price soaring 5.79 percent to 5,208 pence in late morning deals on London's falling FTSE 100 index.

"The merger of Barrick and Randgold creates a gold mining giant," said Nicholas Hyett, equity analyst at stockbroker Hargreaves Lansdown.

"From Randgold's perspective the deal diversifies exposure away from high-risk African markets and towards Barrick's more stable North American assets. Given recent headwinds, that is welcome."