Canadian firm Barrick Gold has agreed to buy London based Randgold Resources for approximately $18.3 billion, making the two combined the world’s largest gold company (based on value and output).
Following the announcement, Randgold shares rose by 6% to £52.15 on the London Stock Exchange. The agreement is for all shares, and states that Barrick will retain their name and hold two-thirds of the newly merged company, with Randgold shareholders owning the rest.
As part of the merger, the new company will be listed on the New York and Toronto stock exchanges, and not the FTSE as it is currently. Randgold’s chief Mark Bristow will run the business, while Barrick Gold’s chairman, John Thornton, will continue as the overall chair.
The merger comes after several years of cost cutting from firms, looking to be as efficient with their mining and dealing as possible in a climate where interest in gold bullion is subdued due to high stock market interest, as well as issues with regards mine safety and the cost of updating mining technology. The aim is to be attractive to investors, and this deal seems to be another move towards that goal.
Speaking to Sky News, Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: "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.”
Not everybody is impressed by the merger however. Kieron Hodgson of investment bankers Panmure told The Guardian newspaper: “Our opinion is that the proposed merger, instead of being based on merit, strength and strategic integration, is more akin to the proverbial ‘two drunks supporting each other at closing time.” Others have described the merger as an “odd move”. The merger is expected to be completed by the end of Spring 2019.