New leadership at Barrick Gold Corp. and Newmont Mining Corp. should have made a merger of the two companies easier with the elimination of decades of baggage that scuppered previous attempts to bring the gold miners together.
But in the end, Newmont's new chief executive officer Gary Goldberg and Barrick's incoming chairman John Thornton couldn't overcome personality clashes and what appears to have been a growing mistrust.
Their deal fell apart over who would ultimately be in charge of the merged gold miner. The dispute comes the same week that Barrick's founder and chairman Peter Munk is due to retire at his company's annual meeting of shareholders on Wednesday.
Private merger discussions turned into a public spectacle on Monday, with Newmont blaming Mr. Thornton for not being constructive and Barrick accusing the U.S. company of not honouring their deal.
The companies outlined details of their merger proposal in a term sheet that was signed April 8 by Mr. Thornton and Newmont's chairman, Vincent Calarco.
But after that date, and with two weeks to go before the companies were due to announce their merger, Newmont wanted to change some of the provisions.
Newmont called the signed document a "draft summary," which suggests the company believed that parts of their deal could still be negotiated.
Their duelling interpretations of the agreement underscores a certain level of mistrust between Toronto-based Barrick and Colorado-headquartered Newmont.
According to the document, Mr. Thornton would have become executive chairman of the combined company, to be called Barrick Newmont Mining. Mr. Goldberg would have become CEO and Mr. Calarco would have become vice-chairman and lead independent director.
But the role of executive chairman is not common in the gold industry.
Mr. Thornton, a former Goldman Sachs executive, is currently Barrick's co-chairman and deeply involved in the company's business. When he becomes executive chairman of Barrick on Wednesday, the former banker will be in charge of overseeing the board of directors as well as executing the gold company's strategy. Mr. Thornton would have had the same responsibilities at the combined company.
When Newmont realized the extent of the executive chairman's authority, the company wanted to strip Mr. Thornton of some of his powers, sources said.
At one point, Mr. Calarco suggested he share some of Mr. Thornton's duties, one person familiar with what transpired said. But Mr. Thornton likened it to a reverse takeover with Barrick paying the premium, the person said. Barrick would have paid $13-billion (U.S.) in stock for Newmont, according to the now-dead proposal.
Spokesmen for Barrick and Newmont declined to comment.
The Newmont acquisition has eluded Mr. Munk for two decades. About four years ago, Barrick and Newmont's merger talks fell apart over which company's chairman would remain in the top position, sources said.
This week, Barrick said that Newmont had tried to renege on three crucial parts of their deal: governance, the location of the combined entity's headquarters and what assets would be spun off. Newmont said that was not true.
It is unknown whether the gold miners will ever rekindle talks. At this time, Barrick has little desire to go hostile and take its bid directly to Newmont shareholders, sources said.
A so-called standstill agreement is also in place. The agreement prevents Barrick from using the information gained during its merger talks to launch a hostile bid for Newmont for a period of time.
Both companies are carrying heavy debt loads and facing a sharp drop in precious metal prices. A merger would have allowed them to combine and cut costs at their Nevada operations.