September 24, 2018 / 9:38 AM / 25 days ago

UPDATE 5-Canada's Barrick Gold to buy Randgold for $6.5 bln

* Shares in Randgold, Barrick jump

* Deal valued at $18.3 bln excluding debt

* Shares in new company to be listed in New York, Toronto

* GRAPHIC-Randgold, Barrick shrs vs gold: tmsnrt.rs/2OMaGAo (Adds quote from Barrick shareholder; updates Barrick share price)

By Zandi Shabalala, Justin George Varghese and Clara Denina

LONDON, Sept 24 (Reuters) - Canada’s Barrick Gold Corp has agreed to buy Randgold Resources Ltd in an all-stock deal valuing the Africa-focused miner at $6.5 billion, to create the world’s largest gold producer in an industry under investor pressure to put capital to good use.

The new Barrick company, which will be listed in New York and Toronto, will own five of the world’s 10 lowest-cost gold mines and have a market value of $19.4 billion based on Monday’s trading. That would make it the world’s biggest gold miner by market capitalization, overtaking Newmont Mining Corp, according to Reuters calculations.

The deal marks the biggest transaction in years in the gold mining industry, where companies have come under fire from investors for poorly managing capital, forcing them to focus on costs while dampening enthusiasm for acquisitions.

Randgold shares closed up 6 percent, making it the biggest gainer in London’s wider mining index and valuing it at 4.93 billion pounds ($6.5 billion). Shares of Barrick, the world’s second-largest gold producer, closed up 5.8 percent in Toronto.

“Randgold has the agility and swift-footedness of a younger and smaller company, much like Barrick in its early years, while Barrick has the infrastructure and global reach of a large corporate company,” Barrick Chairman John Thornton said in a conference call.

Randgold’s long-term boss Mark Bristow will become the chief executive and president of the merged company, taking chief financial officer Graham Shuttleworth with him. Thornton, an ex-Goldman Sachs banker, will be executive chairman.

Bristow, a 59-year-old trained geologist, has been at the helm of Randgold since its inception in 1995 and is known for his straight-talking, hands-on approach to running the company.

“It brings to Barrick a good operator and free thinker in Bristow,” said John Ing, president of Maison Placements Canada and a Barrick shareholder. “It is very much a bet on the individual, the man - and what he has been able to do at Randgold.”

The deal brings together two executives with different leadership styles and backgrounds.

Two-thirds of the directors of the board of the new Barrick will be nominated by Barrick and one-third by Randgold.

“POOR HAND”

The deal value, at 48.5 pounds a share, matched Randgold’s market capitalization as of Friday’s close. The lack of a premium for Randgold shareholders prompted scepticism from some analysts who were also concerned that Randgold’s agility could be bogged down by the mammoth Barrick.

“UK shareholders are arguably being dealt a poor hand with the merger,” said Russ Mould, investment director at AJ Bell. “What Bristow has got to prove now is that bigger is better and the Randgold culture is the one that will perhaps prevail.”

The current spot gold price is not helping the sector, having lost out on traditional safe-haven flows to the dollar, pushing it 10 percent lower this year.

Both Barrick and Randgold had lost a third of their market capitalisations over the past year before Monday’s gains.

“We don’t see a reason to change Randgold’s approach. ... If we can’t deliver something that is bigger and better, then we wouldn’t do it,” Bristow said on a call with analysts.

Bristow said on another call that the new company would be open to weighing options for its Nevada and Australia assets, and said there had been expressions of interest on the latter.

The new company will have the sector’s highest adjusted earnings before interest, tax, depreciation and appreciation, an Ebitda margin of nearly 50 percent based on 2017 numbers, and the lowest total cash cost position among its peers, the companies said.

Under the terms of the deal, each Randgold shareholder will receive 6.1280 new Barrick shares for each share of the African rival, the companies said.

Talks on the deal, which is subject to regulatory and shareholder approvals and scheduled to close in the first quarter of 2019, started more than three years ago with advisers taken in July, a person familiar with the talks told Reuters.

In 2017, Barrick and Randgold combined produced 6.64 million ounces while the next largest gold miner, Newmont, churned out 5.27 million ounces.

The two companies said they were aligned on their strategy with Chinese investors after Barrick said it would make a bigger push to attract investors in China.

Randgold mines also in Mali, Ivory Coast and the Republic of Congo, where it has been faced with regulatory risk, a factor that Barrick’s Africa unit Acacia Mining has to deal with in Tanzania.

M. Klein & Co and Morgan Stanley advised Barrick on the deal, while CIBC and Barclays were the financial advisers to Randgold.

Reporting by Justin George Varghese in Bengaluru, Zandi Shabalala and Clara Denina in London; additional reporting by Noor Zainab Hussain and John Tilak; editing by Emelia Sithole-Matarise, Marguerita Choy and Leslie Adler

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