The world of the top global gold producers is like a jungle. There are predators and prey, and alliances made to keep predators from becoming prey.
“It’s very primal,” says Charlene Ripley, who was executive vice president and general counsel of the former Goldcorp Inc., which found itself caught between the two top predators earlier this year. Giants Newmont Mining Corp.and Barrick Gold Corp. regularly run neck-and-neck for the title of the world’s largest gold miner.
In September Toronto-based Barrick made a move to widen the gap; a US$6.5-billion merger with African miner Randgold Resources Ltd. “That galvanized the gold mining industry into ‘Oh my gosh, we have to have a look at consolidation,’” says Ripley. “Most of the senior miners started looking for dance partners.“
Vancouver-based Goldcorp, which had been struggling, needed to act to keep from becoming prey. It was in talks with an unnamed company about what Ripley calls “a merger of equals, something very different from the Newmont transaction.” (Rumours on the Street were the other company was Newcrest Mining.)
Ripley declined to name the other company but said “the talks went quite far but, in the end, it didn’t work out.”
So late in the fall of 2018, Goldcorp found itself without a dance partner. But it did have a very fortuitous dinner date.
In the small world of senior gold miners, Newmont and Goldcorp considered themselves friends, companies with similar cultures. The chairmen, CEOs and heads of corporate development used to get together informally a few times a year to schmooze. They had one such date planned for Dec. 11.
It was there, over dinner, that Colorado-based Newmont broached a transaction.
The answer was evidently an enthusiastic yes because within days, Neill May, co-chair of the corporate securities group at Goodmans LLP, Newmont’s longtime Canadian counsel, had the file on his desk for a proposed US$10-billion acquisition of Goldcorp.
Newmont’s deal team also included Wachtell, Lipton, Rosen & Katz LLP, its longtime US counsel; White & Case LLP, which did its US regulatory and securities work; and Denver-based Davis Graham & Stubbs LLP, the company’s local counsel.
The four law firms and Newmont's three financial advisers would liaise constantly over the next few weeks to make sure everyone was reading off the same page.
Goldcorp was using its regular counsel at Cassels Brock & Blackwell LLP in Toronto and Neal, Gerber & Eisenberg LLP in Chicago as well as two sets of financial advisers.
Everyone agrees it was urgent to get the deal done quickly. Holiday and New Year’s plans were cancelled.
“In a deal of this size there’re always concerns about other alternatives arising, impediments occurring, leaks,” says May. “So we were under marching orders to proceed as quickly as possible — or even quicker.”
Luckily, Goldcorp still had its data room set up, which helped speed things along. The company struck a special committee of independent directors to oversee a friendly Newmont transaction, and it retained Osler, Hoskin & Harcourt LLP. Alex Gorka, a corporate partner on the Osler deal team, says when they got the call “we went from zero to 100 in a heartbeat.”
Lawyers for Newmont and Goldcorp scrambled to negotiate exclusivity and confidentiality agreements, draft an agreement-in-principle, and conduct regulatory analyses. They also had to do due diligence, integrate legal and business diligence, and facilitate reciprocal diligence.
A group from Newmont flew to Toronto to help move things along. Meetings could easily include 50 people, says May, “all, understandably, with something to say.”
When news of the planned Newmont-Goldcorp US$10-billion deal surfaced, at Davies Ward Phillips & Vineberg LLP in Toronto, Melanie Shishler’s phone started ringing “pretty quickly.”
Shishler is frequently lead counsel on Barrick’s deals. She had led the team on the Randgold transaction.
Newmont went public with its offer for Goldcorp. Jan 14 — just two weeks after Randgold closed. Barrick was aware the transaction would leapfrog Newmont ahead and make it less likely it would be able to win access to Newmont’s Nevada mines, which it had long eyed for the synergies with its own adjacent properties.
Barrick and Newmont had talked a few times over the years but the two never seemed to have the right chemistry. Shishler called the relationship “a dance that never ends.”
It was about to.
Once a friendly deal is announced, the time leading to a shareholder vote is a fraught period, with the transaction vulnerable to competing bids or activist intervention.
May says no matter how busy you are trying to close a transaction, you have to be ready for an interloper. “You have to analyze the possibilities, what they might look like, and mentally prepare. If you’re caught totally by surprise, there’s a problem.”
And sure enough, one was lurking. Shishler’s team was quietly working with Barrick’s longtime US counsel at Cravath, Swaine & Moore LLP to pull together an all-share hostile bid for Newmont.
Unaware of the hurricane forming, Newmont and Goldcorp debated whether Barrick might be too busy digesting Randgold to launch a competing offer. Gorka says Goldcorp’s special committee “saw this as a transformative moment in the gold industry and felt Barrick was unlikely to simply sit it out.”
He says Goldcorp’s top priority was getting deal protections in place. “With a high likelihood of an interloper such as Barrick emerging we knew the deal protections had to be right. They had to be perfect.”
Newmont and Goldcorp came up with a robust package that included a US$650-million break fee, strong non-solicitation provisions, and interim operating covenants restrictive enough to prevent any major change to Newmont’s business without Goldcorp’s consent.
So jaws did not hit the table when Feb. 25, Barrick unleashed its US$18-billion zero-premium hostile bid. To stick with the jungle analogy, says Ripley, “the alligator emerged.”
And there was a kicker. It wanted Newmont to spit Goldcorp out.
Goldcorp was unhappy at the prospect. “We were equally offended and concerned,” Ripley says. But Gorka says the robust deal-protection package that had been negotiated gave Goldcorp “a meaningful seat at the table in the Barrick-Newmont discussions.”
May says a deep analysis of the Barrick bid forced everyone to turn their focus on a dime. Ultimately Newmont’s board concluded the Goldcorp deal remained in shareholders’ best interests.
“So then you had to determine how to respond to the Barrick initiative,” May says. “There was a very intensive analysis whether to respond with a stiff arm, an olive branch or to prevent it from happening. It took up a very substantial amount of time.”
On Monday, March 4 — a week after Barrick surfaced — Newmont answered, formally rejecting the hostile bid.
That’s when things went from interesting to really interesting.
In rejecting the offer, Newmont published a term sheet for combining assets in Nevada — which Barrick had long wanted.
May says Newmont’s analysis concluded that the significant benefits of a Barrick-Newmont combination being touted in the market “focused on a joint venture in Nevada, not a combination of the two companies. Once that initiative was presented to Barrick, from my perspective, there was incredible speed in moving ahead.”
It was a crazy week, says Shishler, Barrick's lead Canadian counsel. The term sheet was analysed. What would a joint venture look like? Was what Newmont proposed fair and feasible?
By Thursday, the two companies agreed it was feasible. The question was could they agree on terms, get the legal work done and documents out to shareholders ahead of Newmont and Goldcorp’s shareholder votes, scheduled four weeks later.
Barrick kept a gun to Newmont’s head. It said if a joint venture wasn’t in place by Monday, March 11 — giving the legal teams just three days — it would proceed with its hostile bid.
May says there was very little sleep for anyone in that key 72-hour period. “People would go home to shower and come back. At Goodmans we have a floor of boardrooms, we went from one to another laying waste to one at a time. One was full of pizza boxes, the next Chinese food containers. We made our way around the floor — that would be the best evidence of how much time we spent there.”
It was much the same at Davies, with some of the Barrick people and Cravath team on site. “What happened in that 72 hours was crazy,” says Shishler. “We negotiated an implementation agreement, the architecture for the joint venture. Just to give you some idea there were 22 or 23 different assets we had to get into a new entity. It would be hard to transfer just one mine in that time frame, much less complete what amounted to 22 or 23 different asset sales. The stakes were enormous, and the amount of work was enormous.”
But Barrick and Newmont also needed a separate agreement on governance structure setting out things like board and advisory committee composition, how funding works, how dilution would work, how people take profits out of the joint venture, and what happens to the joint venture output. Shishler says it was apparent there just wasn’t going to be enough time to prepare that by Monday morning.
“As you can imagine, people weren’t comfortable signing and giving up the [hostile] bid without an agreed governance structure. So we had a wholly baked form of agreement attached to the implementation agreement that would govern the joint-venture going forward.
“I’ve done a lot of joint venture agreements over my career. They generally take months, not weeks. And certainly not days.”
Yet on Monday, March 11, Barrick pulled its hostile bid off the table in favour of a deal that would see the two companies combine assets in Nevada, with Barrick controlling 61.5% of the venture.
On April 18, Newmont’s acquisition of Goldcorp closed.
Four days later, Newmont and Barrick announced they had cleared all the regulatory hurdles and Newmont Goldcorp Corp. was born, instantly becoming the world's largest gold producer by assets.
At least until the next move.
After all, it’s still a jungle out there.
Sandra Rubin is a legal affairs writer and consultant based in Toronto.