Barrick Gold Corp. agreed to buy rival Placer Dome Inc., creating the world’s largest gold producer ahead of longtime No. 1 Newmont Mining Corp., based in Denver. Barrick won after sweetening its offer to $10.4 billion.
Newmont is unlikely to bid, said Axel Merk, who manages $60 million, including shares of Newmont, at Palo Alto, Calif.-based Merk Investments LLC.
“If Newmont had come in, it would have been hugely expensive, as they’re a U.S. company and would have had to pay a significant tax as part of the transaction,” Merk said.
Barrick raised its bid by 9.8 percent to $22.50 a share, or 0.8269 of a Barrick share plus 5 cents, Toronto-based Barrick said Thursday in a statement. The transaction will be financed in part with $1.49 billion from Goldcorp Inc. of Vancouver, which will get some Placer assets in Canada.
The acquisition would be the biggest ever in the gold industry. Mining companies have been acquiring rivals as gold prices rose to a 24-year high and output declined in South Africa, Australia, Canada and the U.S.
“Everyone comes out happy,” said Danny Bubis, who manages the equivalent of $1.5 billion, including shares of Barrick and Placer, at Tetrem Capital Partners in Winnipeg, Manitoba. “Barrick had to raise its offer 10 percent, but avoided a bidding war.”
The deal would be the second-largest acquisition of a Canadian company announced this year, after the purchase of nickel and copper producer Falconbridge Ltd. by rival Inco Ltd.
Placer, whose shareholders would hold 37 percent of Barrick, pledged to pay a $259.7 million breakup fee if it accepts a higher offer from another company.
Newmont, which said last month it was mulling an offer, declined to comment, spokeswoman Heathryn Higgins said.
The transaction fueled expectations for more acquisitions by gold producers, whose profits surged as gold rose as much as 21 percent this year and reached a high of $544.50 an ounce.
