Paulson & Co., which holds 14.2 million shares of Newmont Mining (NYSE: NEM), said on Thursday that it does not support Newmont's proposed acquisition of Goldcorp (NYSE: GG, TSX: G) as it is structured.
Paulson sent a letter to Gary Goldberg, president and CEO of Newmont, that outlines how the deal, under the current terms, creates negative value for Newmont shareholders.
"The $1.5 billion premium to Goldcorp shareholders is unjustified given Goldcorp's poor performance," Paulson wrote. "As currently structured, the synergies from the transaction would only accrue to Goldcorp shareholders, the transaction would transfer a significant percentage of the value created by Newmont's recently announced Nevada joint venture with Barrick to Goldcorp shareholders instead of preserving this value for Newmont shareholders, and following the creation of the Nevada joint venture, Newmont is positioned to create greater value as a stand-alone entity than if the acquisition were completed under current terms."
But Paulson indicated it would reconsider its position if the undue premium to Goldcorp shareholders was eliminated and the full value of the recently-announced Nevada joint venture was retained for Newmont shareholders.
"Eliminating the undeserved premium to Goldcorp and preserving the Nevada joint venture synergies exclusively for Newmont would result in an acceptable transaction," Paulson wrote.
Goldcorp shareholders are set to vote on the deal on April 4 and Newmont investors on April 11.
"The benefit of the merger is in the long term; in the short-term there's going to be a lot of teething pains," Robert Cohen, portfolio manager at 1832 Asset Management, which does not own shares in either company, told Reuters. "I wouldn't be surprised if the deal does come off the rails. But I don't think Paulson & Co have enough clout."
(With files from Reuters)