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Barrick (ABX) and Randgold Receive Final Approval for Merger

Zacks Equity Research

Barrick Gold Corporation ABX announced that the scheme of arrangement for the proposed share-for-share merger deal with Randgold has been sanctioned by the Royal Court of Jersey. Moreover, all conditions related to the scheme have now been waived or satisfied and the transaction is expected to close on Jan 1, 2019.

Per the company, the court’s approval was the last key step toward the creation of a new breed of gold company. Barrick expects to deliver sustainable returns to owners and partners by finding, developing and operating the best assets.

Post the completion of the merger, Barrick plans to change its ticker symbol on the New York Stock Exchange to “GOLD”, starting the first day of trading of the combined company on Jan 2, 2019. Notably, GOLD is presently the ticker symbol for Randgold American Depositary Shares traded on Nasdaq. However, Barrick will continue to trade on the Toronto Stock Exchange under the ticker symbol “ABX” following the merger.

Background of the Deal

In September, Barrick inked an agreement with Randgold for a share-for-share merger deal.

Per the terms, each shareholder of Randgold will receive 6.1280 New Barrick shares for each Randgold share. Post completion of the merger, shareholders of Barrick will own roughly 66.6% and shareholders of Randgold will own roughly 33.4% of the New Barrick Group, on a fully-diluted basis.

Moreover, shareholders of Randgold will be entitled to receive a dividend of $2 per Randgold share for the financial year 2018, which is subject to the approval of Randgold’s board of directors. Meanwhile, shareholders of Barrick will receive an annualized dividend of up to 14 cents per Barrick share, subject to the discretion of Barrick’s board of directors with respect to the declaration of dividends.

The merger is likely to form an industry-leading gold company with the highest concentration of Tier One Gold Assets (mines with 2017 production of at least 500,000 ounces of gold, total cash cost less than $748 per ounce and mine life of more than 10 years). Higher operating metrics, including lowest total cash cost position as well as highest adjusted EBITDA margin are likely to support sustainable investment in growth and shareholder returns.

Price Performance

Barrick’s shares have rallied 30.7% in the past three months compared with the industry’s 10.5% rise.


Zacks Rank & Stocks to Consider

Barrick currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are CF Industries Holdings, Inc. CF, Israel Chemicals Ltd. ICL and Cameco Corporation CCJ, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CF Industries has an expected earnings growth rate of 748% for the current year. The company’s shares have moved up 2.2% in the past year.

Israel Chemicals has an expected earnings growth rate of 19.4% for the current year. The company’s shares have rallied 33.6% in the past year.

Cameco has an expected earnings growth rate of 66.7% for the current year. Its shares have gained 13.9% in a year’s time.

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