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Newmont's $10B deal to buy rival Goldcorp undercut by major shareholder's opposition

Paulson, which holds 14.2 million shares of Newmont, wants to alter the terms of the deal

Gold bars and money
Both gold miners saw their stocks take a hit

Paulson and Co, an investment firm that owns 14.2 million shares of Newmont Mining Corp (NYSE:MEM), has taken issue with the company’s planned acquisition of the Canadian miner Goldcorp Inc (NYSE:GG.) (TSX:G)

In January, the two companies agreed on a $10 billion all-stock deal with the aim of creating the world's largest gold producer – a combined entity capable of producing up to 7 million ounces of gold per year. 

Now, it turns out not everyone is thrilled.

Paulson wrote a letter late Thursday to Newmont CEO Gary Goldberg declaring his objections with the deal and calling for a nearly 23% reduction in its price. Under its current terms, the agreement pays a $1.5 billion premium to Goldcorp shareholders, which Paulson called “unjustified given Goldcorp’s poor performance.”

Newmont shares were up 0.5% to $34.49, while Goldcorp shares fell 3.6% to US$10.76 on the NYSE and 3.6% to C$14.41 on the TSX.

READ: Newmont Mining to create world’s biggest gold producer by output with $10bn deal to buy Goldcorp

Further complicating matters is the joint Nevada venture Newmont forged with rival Barrick Gold Corp (NYSE:GOLD) in March. If the merger goes through, Paulson says, Goldcorp shareholders will reap the rewards of the venture for free.

Paulson wrote that the firm would reconsider its position if the premium to Goldcorp was eliminated and the entire value of the Nevada joint venture was reserved for Newmont shareholders, which it believes reducing the price will achieve.

Goldcorp shareholders are scheduled to vote on the merger on April 4, and Newmont shareholders will follow on April 11.

Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com

Follow him on Twitter @andrew_kessel

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