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Barrick and Acacia reach buyout deal, ending long standoff

Barrick to buy the roughly 36% stake in Acacia it doesn’t already own.

For the past two years, Acacia Mining has faced deteriorating relationships with its largest shareholder, Barrick Gold and the government of Tanzania. Now, one of those battles has found a truce.

In an announcement on Friday, the two companies said they reached a deal for Barrick to buy the roughly 36% stake in Acacia it doesn’t already own. Barrick sweetened its offer to win over Acacia shareholders, some of whom had decried the previous bid as too low. The new offer has an implied value of about 232 pence per Acacia share, a 24% premium to the closing price on Thursday.

“Given all the circumstances, this is possibly the best outcome,” Acacia’s acting Chief Executive Officer Peter Geleta said by phone.

The agreement paves the way for Barrick to negotiate with Tanzania in hopes of resolving an public battle that crippled Acacia’s operations in the country, where it runs three gold mines. Acacia hopes the talks will help set up a “new partnership” with the Tanzanian government, Geleta said.

Acacia’s shares rallied as much as 20% on Friday and traded at 222.2 pence at 9:41 am in London. Before today, the stock had gained 1.8% this year.

A successful deal would close the nearly decade-long chapter of Acacia’s life as a public miner, after the unit was spun out in 2010 as African Barrick Gold. Since then it’s fended off challenges spanning an infiltration by criminal gangs, to invasion by hundreds of intruders armed with machetes and hammers and mining-tax changes.

Its biggest challenge came two years ago, when Tanzania imposed an export ban on two of Acacia’s units and handed the miner a $190 billion tax bill. Since then, the company’s position in the country has deteriorated further, with the government saying in May it would no longer allow Acacia to manage its mines in the country and will only work with Barrick.

Just this week, Tanzania ordered Acacia to stop using a waste-storage facility at its core gold mine, which could disrupt production.

The offer

  • Acacia investors will get 0.168 new Barrick shares for each one held vs the initial Barrick proposal of 0.153.
  • Total deal value is about 343 million pounds ($430 million).
  • Minority shareholders will be entitled to special dividends from the sale of Acacia exploration properties.
  • Acacia’s board will recommend the offer. It also needs approval from 75% of minority shareholders. 
  • The vote is expected to take place in two months. If approved, the deal may be completed in the fourth quarter and Acacia will be delisted. 

The dispute with Tanzania has had a crippling effect of Acacia’s business — forcing the company to stockpile output and curb production — and its shares dropped 50% since the start of 2017 before Thursday’s announcement.

The higher offer shows that Barrick Chief Executive Officer Mark Bristow was forced to shift his position that he wouldn’t raise the bid. In an interview with Bloomberg News in June, the CEO said he had no intention of raising the offer. But he faced shareholder pressure in recent months, with Odey Asset Management opposing the valuation.

Barrick has led discussions with the government in an effort to solve the impasse with Tanzania, while Acacia moved ahead separately with arbitration proceedings.

In a 2017 meeting between President John Magufuli and Barrick Executive Chairman John Thornton, it was tentatively agreed that Acacia would pay $300 million to the government to settle tax claims and would split future returns from operations with the country. At the time, Acacia criticised the move and blamed Barrick for its worsening relationship with Tanzania after Thornton took over negotiations.

© 2019 Bloomberg L.P.

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