October 31, 2018 / 12:22 PM / a month ago

Barrick Gold woos Randgold shareholders with higher dividend

* Agreed $6.1 bln all-share takeover in September

* Barrick increases Randgold dividend by 35 pct

* Takeover expected to close in first quarter of next year

By Zandi Shabalala

LONDON, Oct 31 (Reuters) - Canada’s Barrick Gold has sought to woo Randgold Resources shareholders with sweetened dividend terms to mollify investors unhappy with its nil-premium takeover offer for the Africa-focused mining company.

Toronto-listed Barrick announced in September that it had agreed to buy Randgold to create the world’s largest gold company, but some analysts were critical of the lack of a premium in the $6.1 billion deal.

However, Randgold investors have now been promised a 35 percent increase on their share dividends. They will receive $2.69 cents per share in 2018, up from an initial $2 per share, Barrick said on Wednesday.

“Based on Randgold’s dividend policy and its financial performance in 2018 to date, Randgold has determined that a dividend of $2.69 per share for 2018 would be consistent with that dividend policy,” Barrick said in a statement.

The dividend will be declared and paid prior to the merger closing, it added.

“I assume it followed pushback from Randgold investors, who had been looking for sweeter dividends in light of (Randgold CEO) Mark Bristow’s pledge to return all cash above $500 million, barring new project development,” said Investec analyst Hunter Hillcoat, adding that the original dividend “perhaps seemed a bit mean and investors must have told them so”.

Randgold has steadily increased its payout to shareholders over the years as it generated cash through operating its African gold mines cheaply while rivals struggled with big debts taken on to fund acquisitions and expansion.

Barrick’s executive chairman John Thornton has said that Randgold has the “agility and swift-footedness of a younger and smaller company, much like Barrick in its early years”.

Shares in Randgold are up about 26 percent since the deal was announced on Sept. 24. Barrick shares are up 24 percent.

The takeover represents the sector’s biggest transaction in years and is expected to close in the first quarter of 2019.

“Today’s 35 percent increase in the proposed final dividend from the group is a positive and should seal the deal,” RBC Capital Markets analyst James Bell said in a note.

“Today’s positive bump could also be seen as a nice sweetener for the small number of European and UK-only funds that may be forced sellers of Barrick shares on deal closure.”

Meanwhile, Barrick said it would raise its own fourth-quarter dividend by 40 percent to 7 cents per share and will target an ongoing annual dividend of 16 cents per share from a previously stated 12 cents.

Reporting by Zandi Shabalala Editing by David Goodman

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