Barrick Gold and Randgold Resources agree $6.5bn deal

BY Richard Summerfield

Barrick Gold Corporation, the world’s largest gold mining company, has agreed to acquire Randgold Resources for $6.5bn in an all-share deal, securing the biggest deal in the gold mining space for over three years.

The two companies expect the deal to close by the first quarter of 2019, pending customary closing conditions and shareholder approval. Once completed, Barrick, which will be listed in both New York and Toronto, will own five of the world’s 10 lowest-cost gold mines. The majority of the company’s focus will be on Africa and the Americas.

Barrick’s shareholders will own about two-thirds of the new business and Randgold investors the rest. Under the terms of the deal, each Randgold shareholder will receive 6.1280 new Barrick shares for each share of the Randgold, the companies said.

In a statement announcing the deal, John L. Thornton, executive chairman of Barrick, said: “The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry, bringing together the world’s largest collection of Tier One Gold Assets, with a proven management team that has consistently delivered among the best shareholder returns in the gold sector over the past decade. Our overriding measure of success will be the returns we generate and not the number of ounces we produce, balancing boldness and prudence to deliver consistent and growing returns to our fellow owners, a truly simple but radical and achievable concept. There are no premiums in the merger because we strongly believe in the opportunity to add significant value for our shareholders from the disciplined management of our combined asset base and a focus on truly profitable growth.”

“Our industry has been criticised for its short-term focus, undisciplined growth and poor returns on invested capital,” said Mark Bristow, chief executive of Randgold. “The merged company will be very different. Its goal will be to deliver sector leading returns, and in order to achieve this, we will need to take a very critical view of our asset base and how we run our business, and be prepared to make tough decisions. By employing a strategy similar to the one that proved very successful at Randgold, but on a larger scale, the New Barrick Group will leverage some of the world’s best mines and talent to create real value for all stakeholders.”

2018 has been a challenging year for the industry. The price of gold has fallen more than 8 percent and the shares of both Barrick and Randgold have declined more than 30 percent. The companies hope that the merger will enable them to cut costs and drive profitability.

News: Canada's Barrick Gold to buy Randgold for $6.5 billion

Marsh & McLennan to buy JLT for $5.7bn

BY Richard Summerfield

Marsh & McLennan, one of the world’s largest insurance brokers, has agreed to acquire British rival Jardine Lloyd Thompson Group (JLT) for around $5.7bn. The deal, the latest in a series of mergers in the insurance sector, is expected to close in spring 2019, subject to customary antitrust and regulatory approvals, and the approval of JLT’s shareholders.

Under the terms of the deal, holders of JLT's common shares will receive a cash consideration of £19.15 for every JLT share held, a 38 percent premium on the average price of JLT’s shares over the past three months. The total cash consideration equates to $5.6bn in fully diluted equity value, or an estimated enterprise value of $6.4bn. The transaction will be funded by a combination of cash on hand and proceeds from debt financing.

"The acquisition of Jardine Lloyd Thompson creates a compelling value proposition for our clients, our colleagues and our shareholders,” said Dan Glaser, president and chief executive of Marsh & McLennan. “The complementary fit between our companies creates a platform to deliver exceptional service to clients and opportunities for our colleagues. On a personal level, I have come to know, and respect, Dominic Burke and his management team from my time both at MMC and as an underwriter. I am confident that with the addition of the talented colleagues of JLT, Marsh & McLennan will be an even stronger and more dynamic company,” he added.

The deal is expected to achieve annual cost synergies of around $250m within three years of completion, according to Marsh & McLennan, though the realisation of these cost synergies will likely result in one-time integration costs of approximately $375m. In total, Marsh & McLennan expects to cut 2 to 5 percent of the combined company’s jobs. Savings are also expected in real estate and IT operations. Annual revenue is expected to rise to $17bn after the deal closes.

The insurance space has seen a spate of consolidation deals announced this year as the industry grows accustomed to tougher regulations and more attractive prices. In March, AXA agreed to acquire XL Group for $15.3bn, around a month after American International Group said it would buy reinsurer Validus for around $5.6bn.

News: Marsh & McLennan to pay £4.3 billion for British insurance broker JLT

British Steel cuts 400 jobs in bid to secure “long-term future”

BY Fraser Tennant

In a streamlining process designed to ensure its long-term growth, British Steel is to cut 400 jobs at its sites in the UK, Ireland, France and the Netherlands – approximately 10 percent of its 5000-strong workforce.

The cuts will be made in managerial, professional and administrative roles, despite first quarter profits being a reported £21m.

The company has stated that the cuts are part of the company’s ongoing transformation – which has already seen it commit £170m toward improving its manufacturing operations during its first three years. British Steel was saved from collapse two years ago when investment firm Greybull bought the business for £1 from Tata Steel.

British Steel is also taking further steps to secure a sustainable future, including continuing to improve manufacturing performance and increasing turnover through strong sales.

“We have made a strong start to life as British Steel but our external environment is constantly changing,” said Gerald Reichmann, British Steel’s chief financial officer. “It is unfortunate we need to go through the proposed redundancy process but by focusing on profitable, niche products I am confident we will create a long-term future for our business and the communities in which we operate.”

British Steel has made it clear that no site closures are being considered as part of the streamlining process. The company has also said that it remains committed to making significant investments in its core products – rail, wire rod, construction and special profiles – along with its iron and steel-making operations.

“It is important our business continues to evolve,” said Roland Junck, British Steel’s executive chairman. “We have already committed £120m to capital expenditure projects and are pressing ahead with the £50m upgrade to our Scunthorpe Rod Mill. However, the pace of change we need in this challenging industry requires further and continued investment along with more agile and efficient operations. To help us achieve this, we have to make difficult decisions.”

Mr Reichmann concluded: “Strong market conditions support the approach we are taking – we have a robust order book and continue to secure significant contracts with customers, old and new, around the world.”

News: British Steel plans to shed 400 jobs 'a body blow' to workforce

Network Rail agrees to sell the arches in £1.5bn deal

BY Fraser Tennant

In a £1.5bn deal that will help fund railway upgrade plans, bring major improvements for passengers and reduce funding burden on taxpayers, Network Rail has agreed to sell its commercial estate portfolio to property company Telereal Trillium and investment firm Blackstone Property Partners.

Upon completion of the transaction, Telereal and Blackstone will hold equal ownership stakes and intend to be long-term owners of the estate. Both parties have adopted a ‘tenants first’ approach, cemented in a tenants’ charter, which offers a commitment to engage with all tenants and communities in an open and honest manner.

Network Rail launched the sale of its commercial estate in November 2017. The portfolio consists of approximately 5200 properties, the majority of which are converted railway arches. The sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway.

Proceeds from the sale will help fund the railway upgrade plan, which is bringing 170,000 seats into major cities, 6400 extra train services and 5500 new train carriages – a 30 percent increase in capacity.

“This deal is great news,” said Sir Peter Hendy, chairman of Network Rail. “For tenants it will mean significant commitment and investment, and for passengers and taxpayers it will mean massive, essential improvements without an extra burden on the public purse.”

Both Telereal and Blackstone have long and successful track records of operating large commercial estates across the UK. Telereal will oversee the day-to-day property management of the portfolio.

“The arches portfolio is a unique and vital part of the UK economy,” said Graham Edwards, co-founder and chairman of Telereal. “We are tremendously excited by the prospect of working with its entrepreneurial tenant base.”

James Seppala, head of European Real Estate at Blackstone, added: “The portfolio is unique in the role that it plays in stimulating economic activity, growth and prosperity, in particular among SMEs and local communities.”

Mr Hendy concluded: “This has been a very thorough, detailed and complex process and we are pleased we are now in a position to announce Telereal Trillium and Blackstone Property Partners as the new owners of the commercial estate.”

News: Network Rail sells $2 billion property portfolio to fund railway improvements

Volkswagen faces $11bn damages claim

BY Richard Summerfield

German car manufacturer Volkswagen AG was taken to court on Monday as investors sought $10.6bn in compensation as a result of the 2015 ‘dieselgate’ scandal.

A small group of shareholders representing 1670 claims against Volkswagen and around 4000 other investors commenced legal proceedings at the Braunschweigh higher regional court in Northern Germany, just over 20 miles from Volkswagen’s Wolfsburg headquarters.

“VW should have told the market that they cheated and generated risk worth billions,” said Andreas Tilp, a lawyer for the investors. “We believe that VW should have told the market no later than June 2008 that they could not make the technology that they needed in the US.”

The scandal became public after the American Environmental Protection Agency (EPA) issued a public notice of violation in September 2015. The subsequent EPA investigation precipitated a collapse in the company’s stock price with shares in Volkswagen falling 40 percent over two days in September 2015, wiping billions off the company’s market value. As a result, in October 2015 the first group of shareholders filed suit against the company. They were later joined by institutional investors including BlackRock Inc., the California Public Employees’ Retirement System and Allianz Global Investors.

Volkswagen has admitted systematic emissions cheating, but denies wrongdoing in matters of regulatory disclosure, saying that the suit is unfounded. The company insists that a group of engineers acted without authorisation when fitting the ‘defeat devices’ which allowed Volkswagen’s vehicles to cut harmful emissions during regulatory testing, and says the information it had before the American authorities intervened was not significant enough to warrant warning capital markets.

“This case is mainly about whether Volkswagen complied with its disclosure obligations to shareholders and the capital markets,” Volkswagen’s lawyer Markus Pfueller told the court. “We are convinced that this is the case.” Mr Pfueller noted that the company was “confident” that it had “complied with its disclosure obligations toward shareholders and the capital markets”.

Factoring in previous settlements reached by Volkswagen, the company could ultimately pay around $35bn for its transgression, including payouts to US customers, states and regulators and a €1bn settlement with German prosecutors.

Judge Christian Jaede said the period from early 2014 onward was significant as this was when the company learned that US tests showed its diesel cars emitted far more toxic nitrogen oxide on the road than under laboratory conditions. A decision in the case is not expected until 2019.

News: VW investors sue for billions of dollars over diesel scandal