TORONTO/LONDON (Reuters) - Barrick Gold Corp ABX.TOGOLD.N has struck a deal to buy out its fellow shareholders in Acacia Mining ACAA.L with a higher bid than originally proposed, raising expectations Acacia's long-running tax dispute with the Tanzanian government will finally be resolved.
The original buyout proposal from Barrick, which owns 63.9% of Acacia, drew accusations from minority shareholders that Barrick was taking advantage of the Tanzania-focused company’s woes to buy it on the cheap. But Acacia acknowledged that a takeover would be the best solution to its problems.
The improved bid was welcomed by the company and investors, with Acacia shares jumping as much as 20% on Friday. They were trading at 222 pence, their highest since April, at 1453 GMT (10:53 a.m. EDT).
“We will... get these businesses back on track,” Barrick Chief Executive Mark Bristow said in a phone interview, indicating the company could also sell some of Acacia’s three mines in Zambia, along with most of its exploration properties.
“Depending on what they look like after they are in a reasonable form, we will again look to see if there is a better home for some of the assets that might not fit the Barrick investment filter,” he said.
Barrick is offering 0.168 of its shares for every Acacia share, up from the original 0.153. That values Acacia at about 232 pence per share, or 951 million pounds, compared with its closing price of 186.6 pence on Thursday.
Acacia shareholders could also get special dividends from the sales of exploration properties, which would add another 9 pence per share.
“Though in the end, Barrick needed to increase its offer, this deal should allow Acacia to begin operating fully,” analysts at Credit Suisse wrote in a note.
(For a graphic on 'Acacia shares gain since Barrick's bid in May', click tmsnrt.rs/2O5wb3v)
Relations between Barrick and Acacia have been strained for years, particularly after Tanzania hit Acacia with a $190 billion tax bill - later reduced to $300 million in a 2017 agreement - as Barrick took the lead in talks with the government.
While declining to provide a time frame for the dispute`s resolution, Bristow said the 2017 agreement presupposes the first payment of the tax settlement will come from sales of stockpiled gold concentrate, recognising the need for shipments to begin.
“It’s a good deal, especially given the current situation in the country,” Acacia’s interim CEO, Peter Geleta, said in a phone interview.
The deal with Barrick will be “a good opportunity to rebuild relationships,” Geleta said.
Acacia still faces an imminent ban at its North Mara mine in Tanzania beginning Saturday that could halt operations at its biggest revenue earner.
Geleta said he hoped a swift resolution to the lingering threat could be agreed.
Another pressing issue is two Acacia employees and one former employee, who have been in jail in Tanzania since October.
Tanzania’s government was positive about the deal on Friday.
“We commend the two parties for the mutual agreement thus far. We will eagerly wait for official communication from Barrick to chart the way forward,” Tanzania government spokesman Hassan Abbasi tweeted.
Barrick’s increased exchange ratio takes into account $10 million worth of exploration assets to be excluded from sales. A 38% increase in the price of Barrick shares since before its original proposal also contributed to the increased valuation.
But that is still lower than the 271 pence per share Acacia said it was worth earlier this month under a “preferred-value” scenario, based on an independent review.
A source close to the matter told Reuters on condition of anonymity that, although the Barrick offer is not an ideal outcome, it is Acacia’s best option as previous attempts to sell the company did not end well because of its problems in Tanzania.
Additional reporting by Fumbuka Ng’wanakilala in Dar es Salaam, Noor Zainab Hussain, Muvija M and Yadarisa Shabong in Bengaluru, Clara Denina in London; Editing by Saumyadeb Chakrabart, Mark Potter and Jonathan Oatis
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