Governance in Brief
March 7, 2019 | Editor: Martin Wennerström
Barrick Gold to move forward with hostile bid for Newmont Mining
Newmont Mining announced on March 4 that its board of directors had unanimously rejected the unsolicited takeover bid launched by Barrick Gold, thereby turning down a deal which would have combined the world’s two largest gold companies into an undisputed global leader. The company countered the offer with a joint venture proposal, while also reiterating its plans to proceed with its acquisition of Goldcorp Inc, describing it as a “superior value creation opportunity”. Barrick Gold CEO Mark Bristow has described the joint venture proposal as having “unrealistic preconditions,” while indicating that the offer will be taken directly to Newmont shareholders. Under Newmont’s offer, Barrick would hold a 55% stake in the new entity, whereas both companies would have equal representation on the management and technical committees. Barrick’s attempt to break up Newmont’s merger with Goldcorp comes after the completion of its own acquisition of Randgold Resources in January 2019, in one of the biggest mining deals of recent years. If successful, the Barrick-Newmont tie-up would reshape the mining industry, which is experiencing a consolidation trend in response to increased extraction costs.
Elliott launches new proxy fight at Hyundai
Elliott Management has solicited the support of shareholders ahead of the March 22 AGMs of Hyundai Mobis and Hyundai Motor Company, where the hedge fund has submitted proposals calling for the installation of new board members, the payout of over USD 6 billion in dividends, and the establishment of new committees. Hyundai Mobis has described Elliot’s dividend proposal as “undermin[ing] future competitiveness”, whereas Hyundai Motors declared that it would lead to a “massive cash outflow”.
Through its proposals, Elliott seeks to address what it sees as an overcapitalized balance sheet and unaccountable board.
This is not the first occasion that Elliott has interfered in the governance of the Hyundai conglomerate. In 2018, it successfully halted a planned governance overhaul at the South Korean conglomerate.
SEC asks court to hold Elon Musk in contempt
On February 22, the Securities and Exchange Commission requested that a federal court hold Elon Musk in contempt for violating a September 2018 settlement, citing Musk’s recent tweets on Tesla’s production outlook. The settlement had required Musk to ”seek pre-approval of any written communications, including social media posts, that contained or reasonably could contain information material to Tesla or its shareholders.” In response, Musk followed up with another tweet, stating that “something is broken with SEC oversight”. Whilst last year’s settlement required Musk to step down as Chairman of Tesla’s board, speculations have emerged that the SEC could now request that Musk also be removed as CEO.
City of Philadelphia sues banking giants over bond price-fixing
On February 20, the City of Philadelphia filed a class action lawsuit against Bank of America and six other banks, including Wells Fargo and Goldman Sachs Group, claiming the lenders colluded to fix prices on its variable-rate demand obligations (“VRDOs”) between 2008 and 2016. The tax-exempted municipal bonds incorporated a put option, which allowed the borrowers to pay lower interest rates. It is alleged, however, that the seven banks formed a cartel to maintain artificially high interest rates, thus costing the city “billions” in extra interest payments. The US Justice Department has also launched a preliminary investigation into the banks’ reported misconduct, based on information received from a whistleblower between 2015 and 2016.