Canada's Barrick Gold to buy Randgold Resources in $18.3 billion deal

By Zandi Shabalala, Justin George Varghese and Clara Denina

LONDON (Reuters) - Canada's Barrick Gold has agreed to buy Randgold Resources Ltd in a $18.3 billion share deal to create the world's largest gold company by value and output in an industry under investor pressure to put capital to good use.

The new Barrick company, which will be listed in New York and Toronto, will own five of the world's 10 lowest cost gold mines and will be valued at $24 billion including debt.

The deal marks the biggest transaction in years in the gold mining industry, where companies have come under fire from investors for poorly managing capital, forcing them to focus on costs while dampening enthusiasm for acquisitions.

"Randgold has the agility and swift-footedness of a younger and smaller company, much like Barrick in its early years while Barrick has the infrastructure and global reach of a large corporate company," Barrick Chairman John Thornton said in a conference call.

Randgold boss Mark Bristow will become the chief executive of the new merged company while Thornton will be executive chairman.

The merger terms value Randgold at 4.58 billion pounds ($6 billion), at 48.5 pound-a-share, according to Thomson Reuters data. The offer is in line with Randgold's market capitalization as of Friday's close.

Randgold shares were up 4.3 percent at 0901 GMT, making it the biggest gainer in London's wider mining index.

Some analysts were, however, sceptical about the deal.

"Our opinion is that the proposed merger, instead of being based on merit, strength and strategic integration, is more akin to the proverbial 'two drunks supporting each other at closing time'," Kieron Hodgson, equity analyst at Panmure Research said in a note.

The current spot gold price is not helping the sector, having lost out on traditional safe-haven flows to the dollar, pushing it 10 percent lower this year. [GOL/]

Both Barrick and Randgold have lost about a third of their market capitalisations over the past year.

Bristow himself has publicly railed against the "value destruction" in the gold mining sector.

Under the terms of the deal, nicknamed by Randgold as "Project 'Bulbul' in reference to a small African bird, each Randgold shareholder will receive 6.1280 new Barrick shares for each share of the African rival, the companies said.

Barrick shareholders will own about 66.6 percent of the new Barrick merged company while Randgold shareholders will own about 33.4 percent.

Talks on the deal started more than three years ago with advisors taken in July, a person familiar with the talks told Reuters.

It is subject to regulatory approvals, the statement said.

(Reporting by Justin George Varghese in Bengaluru, Zandi Shabalala and Clara Denina in London Additional reporting by Noor Zainab Hussain; Editing by Emelia Sithole-Matarise)