LONDON / TORONTO (Reuters) – Canada's Barrick Gold and takeover target Randgold Resources will increase their dividend distribution before shareholders vote for their $ 6.1 billion deal next week, miners said.
FILE Photo: Barrick Gold Chairman John Thornton speaks at the company's Annual General Meeting on April 28, 2015 in Toronto. REUTERS / Mark Blinch / File Photo
Barrick's purchase of the African miner, which was bought for all stocks in September, sparked some analyst criticism as Randgold did not lack a premium that has strong operational and financial performance.
Randgold plans to sweeten its dividend for 2018 by 35 percent to $ 2.69 per share of $ 2 and pay before the merger closes, Barrick said in a statement.
The increase reflects Randgold's annual performance and dividend policy, Barrick said.
Scotiabank analyst Tanya Jakusconek said she was not surprised because the dividend outlook was a minor concern for Randgold shareholders, but the increase was essentially "just a small change".
While Randgold needs 75 percent of the votes in support of the deal, Jakusconek said in a statement to clients that it wanted to start the transaction, pointing out the company's outperformance, tight trading spread and positive referrals from leading proxy advisors.
Rand gold stocks have risen by about 26 percent since the deal's announcement on September 24, and Barrick's shares were up around 24 percent.
Randgold has steadily increased its dividend over the years, generating cash through the cost-effective operation of its African gold mines, while rivals have struggled with large debts to finance acquisitions and expansion.
"I expect Randgold's investors to have received a pushback that, given the promise of Mark Bristow (Randgold CEO) Mark Bristow, was looking for a sweeter dividend to return anything over $ 500 million in cash, if there were no new ones Project developments were made, "said Investec analyst Hunter Hillcoat.
Barrick is now aiming for a fourth-quarter dividend of 7 cents per share (vs. 5 cents) and a dividend of 16 cents for 2018. The increase will cost about $ 65 million, Barrick said.
The Toronto-based company said it would seek an annual 16 cents annual payout versus 12 cents based on "strong fundamentals" and merger benefits, including additional overheads savings, lower costs and potential asset sales.
Barrick would not describe in detail the expected financial benefits of the merger.
The largest transaction in the industry for years will be completed in the first quarter of 2019. Barrick shareholders vote on November 5 and Randgold investors vote on November 7.
GRAPHICS: Barrick, Randgold Stocks – tmsnrt.rs/2P0Zl3S
"Boosting the group's current dividend by 35 percent is positive and should seal the deal," James Bell of RBC Capital Markets said in a statement.
Report by Susan Taylor in Toronto and Zandi Shabalala in London; Editing by David Goodman and Paul Simao