Merger and acquisition activities across the globe has been hitting record highs this year. The frenzy has spread to the gold mining space as the world’s largest gold producer Barrick Gold (ABX – Free Report) has agreed to buy Africa-focused rival, Randgold Resources Ltd (GOLD – Free Report) in an all-stock deal.
Per the terms of the deal, each Randgold shareholder will receive 6.1280 new Barrick shares for each share of the African rival. Barrick will own around two-thirds of the combined group and Randgold will hold the remainder. The merger, which is is expected to close by the first quarter of 2019, is subject to approval by shareholders of both the companies, regulatory approvals and other customary closing conditions. The deal represents the biggest transaction in years in the gold mining industry, where companies are struggling with poorly managed capital.
The combined entity will create an industry-leading gold company worth $18 billion with the greatest concentration of Tier One gold assets. It will be led by a proven management team that has consistently delivered the best shareholder returns in the gold sector over the past decade. It will hold five of the world’s 10 largest bullion deposits and have the ability to produce around 5.5 million ounces of gold each year.
The acquisition will bolster Barrick Gold’s position in Africa, where it has 64% stake in Acacia. However, it is blocked by an export linked to a $200 billion tax dispute in Tanzania.
Market Impact
Following the announcement of the deal, shares of Randgold climbed nearly 7% in pre-market trade while shares of Barrick Gold were up 3.3% at the time of writing.
The news has put the spotlight on a couple of gold mining ETFs that could be the best ways for investors to tap the opportunity arising from the ABX-GOLD deal. Investors should keep a close eye on the movement of these ETFs over the coming weeks:
VanEck Vectors Gold Mining ETF (GDX – Free Report)
