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Barrick Gold's takeover offer undervalues Acacia Mining, analysts say

The offer by Barrick Gold Corp. to buy the remainder of Acacia Mining PLC's shares for US$285 million was not in the best interest of shareholders in the London-listed company and unnecessarily undervalued the shares, analysts said.

Jonathan Guy of Numis Corp. PLC, speaking to S&P Global Market Intelligence, said they felt it was a "bad deal for the minorities and undervalues the assets especially as there is a resolution with the Tanzanians on the table." He said that while "[Acacia Mining] equity holders will retain exposure though the shares in [Barrick Gold], the upside will be clearly less in the standalone vehicle."

Major Acacia shareholder Fidelity International Securities Inc. told Reuters on May 31 that the offer for Acacia is about 50% too low and it is a "no brainer not to accept it." Fidelity owns 3.2% of Acacia.

Timothy Huff, analyst at Peel Hunt LLP, said in a note that until there was a "decent" formal offer on the table, there was little reason for Acacia to respond. The offer was an aggressive tactic and was primarily a distraction by Barrick, he said.

Panmure Gordon (UK) Ltd. Research Division investment analyst Kieron Hodgson, speaking to S&P Global Market Intelligence, also felt shareholders were not getting value from the deal. "Barrick shareholders, in the long run, will probably do okay. Although whether Acacia can return to the equivalent peak valuations, equal to £6.70 per share, seems a long way away from where we stand today."

Acacia and the Tanzanian government have been engaged in a dispute since July 2017 when the state said Acacia owed outstanding taxes of US$190 billion as it had falsely declared bullion exports. The allegation came amid a government ban on exports of concentrates from Tanzania. Barrick, the majority shareholder with 63.95%, led discussions that led to a tentative settlement in February with the government to resolve the dispute.

Barrick CEO Mark Bristow had said in February that "significant amounts of real value had been destroyed by the dispute, and in Barrick's view, the settlement will allow the business to focus on rebuilding its mining operations in partnership with their respective shareholders, and most importantly long suffering investors, including Barrick." In May, Bristow told the market that Barrick had made an informal offer to buy all remaining Acacia shares.

As Barrick has yet to make a formal offer, Acacia is expecting to go ahead with an international arbitration hearing in July, with an outcome expected by the end of this year.