Skip to Content
Stock Analyst Update

Barrick Improves Outlook With Unique Purchase

In an industry that has a history filled with expensive acquisitions, Barrick's proposed acquisition of Randgold stands apart.

Mentioned:

On Sept. 24,  Barrick (ABX) Gold announced the acquisition of Randgold Resources in one of the most unique transactions in gold mining. The offer is all equity, with each Randgold share entitled to 6.128 new Barrick shares. The exchange rate is based purely on recent trading history and contains no premium for Randgold shareholders. Pro forma ownership in the combined company will see current Barrick shareholders owning roughly 66% of the company and current Randgold shareholders owning 33%--a split that reflects their unaffected market capitalizations.

Although we don’t include Randgold in our current gold miner coverage, we don’t think the acquisition will affect our fair value estimate by a significant amount after we update our model. Randgold currently trades at about 9 times 2019 EBITDA estimates, in line with other higher-quality gold miners such as Agnico Eagle. Furthermore, Randgold’s share price has fallen more than 35% year to date, in line with the broader gold sector amid weakening gold prices. We don’t anticipate a change to Barrick’s no-moat rating at this time.

In an industry that has a history filled with expensive acquisitions, resulting high leverage, and deals that fail to deliver any value to shareholders, Barrick’s proposed acquisition of Randgold stands apart. By paying no premium, Barrick minimizes the risk that it overpaid or destroyed shareholder value. In addition, because the deal contains no cash component, Barrick will have to raise no new debt to complete the deal, saving it from pressuring its balance sheet as it had in past acquisitions like Equinox Minerals.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.