Financial_Times_UK 28Jan2020

18 ★ FINANCIAL TIMES Tuesday28 January 2020

COMPANIES

N E I L H U M E

A tough-talking South African on a
mission to shake up the mining indus-
try. For years, the name that would have
sprung to mind wasGlencore ossb Ivan
Glasenberg ut not any more. Theb
sector has another swashbuckling
executive to watch:Mark Bristow, head
ofBarrickGold.
Since the Natal-born geologist took
control of the world’s second-biggest
gold miner just over a year ago he has
been a whirlwind of activity. Highlights
includea hostile bid or its arch rival —f
nowapartnerinajointventure—abuy-
out o f struggling subsidiary Acacia Min-
ing,andmorethan$1bnofassetsales.
ButthisisjustthestartforMrBristow,
61, an adrenalin junkie who enjoys igb
gamehunting ndflyingaircraft.a
“It has been an amazing year,” he said
during a wide-ranging interview. “We
now have a solid foundation to build on
and probably the strongest balance
sheetinthegoldindustry.”
The market is already buzzing with
speculation about Mr Bristow’s next
move, withFreeport-McMoRan, owner
of the big Grasberg copper and gold
mine in Indonesia, regarded as a poten-
tialtakeovertarget.
Mr Bristow recently described copper
as a “strategic metal” because of the role
it will play in the shift to a greener econ-
omy. “The new, big gold mines are going
tocomeoutoftheyounggeologiesofthe
world,” he said. “And in young rocks,
goldcomesinassociationwithcopperor
viceversa.”
Asked if he had discussed the merits
of a deal with Freeport chief executive
Richard Adkerson, hesaid therehad
been “conversations” but thesehad
beenmoretheoretical.
“As the leader of the most valuable
gold company in the world, I should be
looking at the world’s best gold mines,”
he said. “It makes sense for us to be

interested in looking at Grasberg and

asking ourselves whether Freeport is

going to remain an independent com-

panyornot.”

A workaholic who maintains a pun-

ishing travel schedule, Mr Bristow

became chief executive of Barrick in

early 2019 after the Toronto-listed com-

pany consummated a nil-premium

merger ith Randgold Resources, thew

Africa-focused miner he built into one

oftheworld’slargestgoldproducers.

The idea behind the deal was to create

a gold company focused around five so-

calledtier1assets,minescapableofpro-

ducing more than 500,000oz of gold

annuallyforatleastadecade.

When the Randgold merger was

announced in September 2018 there

were worries about how Mr Bristow

would work alongside Barrick’s execu-

tive chairmanJohn Thornton, a no-

nonsenseex-GoldmanSachsbanker.

However, Mr Bristow and his close-

knit teamhave been given their head to

run the company. One of his first moves

was to cut almost 100 jobs at Barrick’s

Toronto head office in an effort to shape

a “lean, mean machine at the top”. He

has also changed the management

teamsacrossmostoftheBarrickassets.

Analysts and investors say that Mr

Bristow has delivered on the promises

he made at the time of the merger: bal-

ance sheet deleveraging, reducing head

officecostsandassetsales.

“If the gold price stays around

$1,500 an ounce and we generate the

same sort of free cash flow as [

and]deliverontherestofourprom-

ises as far as realising the sale of non-

core assets we will have zero net debt

[by the end of 2020],” Mr

Bristowsaid.

A deal that saw Barrick

and arch rivalNewmont

Corporation combine

their mines n Nevadai

into a joint venture,

after Barrick dropped its hostile bid for

thelatter,hasalsowonplaudits.

This has been reflected in Barrick’s

share price, which has risen 76 per cent

since the Randgold merger was

announced — beating Newmont (46 per

cent)andthegoldprice(31percent).

Still, some investors lament the pass-

ingofRandgold.Onetop20shareholder

said it would have delivered a better

share performance had it stayed inde-

pendent — a view that is backed up by

recentresults,whichshowtheRandgold

side of the portfolio continuing to spar-

klewhiletheBarrickportionstruggles.

Randgoldalsoboastedagenerousdiv-

idend policy, something Barrick has yet

to match. Analysts estimate Barrick’s

dividend would need to rise two to three

times from where it is today to be com-

parablewithRandgold’spayout.

Mr Bristowsaid Barrickwould look at

a long-term dividend policy once its 10-

year strategic plan as in place earlyw

this year. Barrick also remains a very

complex business with assets in the

Americas, Africa and Asia, leaving Mr

Bristow and his management team

stretched.

“There is a core of 10 Randgold

executives who run the business.

They used to fly around all the

assets once a quarter,” said one

analyst who used to follow

Randgold but does not cover Barrick.

“That is more difficult to do now given

thesizeandscaleofthebusiness.”

James Bell, an analyst at RBC Capital

Markets, also pointed out that the inte-

gration of the two companies had

become more complicated as some of

theassetsflaggedaspotentiallynoncore

at the time of the Barrick dealwere now

seenaslessdisposable.

“A good example is Porgera [a mine in

Papua New Guinea]. This was an asset

initially flagged as noncore but that’s an

asset the company is now very excited

about because management have seen

thegeologicalpotential,”hesaid.

Mr Bristowsaid Barrickwould con-

tinue to divest assets where it made

“good, commercial sense,” citing the

recent sale of its stake in the Massawa

gold project in Senegal for an upfront

paymentof$380m.

Mr Bristow, who had open heart sur-

gery in 2017, said he did not know when

he wouldstepdown.

“I don’t have a particular timeframe

but I gave the market a [promise of at

least a] full five years. I am certainly

committed to that,” he said, adding that

there was already a pool of executives

qualifiedtoleadtheorganisation.

“And you can imagine how much bet-

ter they are going to be with a bit of

coachinginthenextcoupleofyears.”

Barrick Gold’s

swashbuckler

on lookout for

next big deal

A year running sector’s second-largest

iner has not dulled Bristow’s ambitionsm

The point of the

Randgold

merger was to

focus on ‘tier 1’

mines that could

produce more

than 500,000oz

of gold a year for

a decade or

more. Mark

Bristow, below,

has pledged to

stay at the helm

of Barrick Gold

for a full five

years

Carla Gottgens/Bloomberg

‘It has been

an amazing

year. We

now have

a solid

foundation

to build on’

Mark Bristow

Barrick Gold’s free cash flow

is expected to rise

as debt falls

bn

Sources: BMO Capital Markets; Refinitiv

Net debt Free cash flow

-



-





    

Estimate

Barrick delivering

on big promises

Share prices and indices (rebased)













  

Barrick Gold

NYSE Arca Gold

Bugs index

Newmont

Gold price

L E I L A A B B O U D —PA R I S

Capgemini, the French IT services

group, has persuaded a majority

of shareholders in rivalAltran ot

accept its takeover bid and ignoreElli-

ott Management’s demand for a higher

price.

Capgemini has acquired 53.6 per cent of

Altran’s shares following a tender offer

that closed on January 22, the French

markets regulator saidyesterday. It

addedthatthewindowforAltranshare-

holderstosellwouldnowbeextendedto

February10.

Capgemini raised its bid for Altran to

€14.50 a sharethis month, valuing the

company at €3.7bn, despite saying ti

would not budge from the €14 per share

itinitiallyofferedinJune.

Winning a majority stake means that

Paul Hermelin, Capgemini’s veteran

chief executive, has managed to clinch

the company’s biggest deal in a decade

beforehestepsdowninMay.

The task of how to handle the holdout

shareholders at Altran will fall

to his successor, current chief operating

officer Aiman Ezzat, although

Mr Hermelin will remain group chair-

man.

Elliott declined to comment on the

results of the tender offer. It has

investedroughly€500mtobuildastake

ofabout14percentinAltran.

While the final size of Capgemini’s

stake remains to be seen, it is unlikelyit

will win over enough Altran sharehold-

ers to complete a full takeover, which

analysts said could complicate the inte-

gration process and limit the cost sav-

ingsfromthedeal.

Elliott, which has said that €17 per

share is a fairer price, could still pres-

surethecompanytobuyitsshares.

The activist investor, which has been

stepping up its campaigns in Europe

over the past year, has described

Capgemini’s original offer as“inade-

quate” nd argued that the sale processa

wasplaguedbyaseriesofcorporategov-

ernance shortcomings. Capgemini has

disputedthoseclaims.

The fund has dug in for similar

conflicts for years, such as when itbat-

tled Vodafone hen seeking a higherw

price in its takeover of Kabel Deutsch-

land.

Capgemini has pledged not to make

any offer for the remaining Altran

shares at a higher level than €14.50 for

thenext18months.

Technology

Capgemini

wins fight with

Elliott over

Altran bid

JA N E C R O F T

A property developer who struggled to

repay a £75m loan fromRoyal Bank of

Scotland fter spending part of it on aa

yacht, a jet and fast cars has lost a

lawsuitagainstthelender.

Oliver Morley sued RBS in the High

Court over the loss of part of his prop-

erty portfolio, which had been used as

collateral to help secure the loan in

2006.

He claimed that, after he struggled to

repay the loan when it was due in

2009, RBS placed him under “unlawful

and illegitimate pressure” to transfer

assets to the bank’s West Register unit,

which handled property from dis-

tressed borrowers and was part of its

now-defunct Global Restructuring

Group.

GRG’s notorious division has been

accused of exploiting businesses

following the 2008 financial crisis by

pushing the companies to restructure

and then profiting from buying assets at

heavily reduced prices. RBS denied

wrongdoing.

However, yesterday Mr Justice Kerr

dismissed Mr Morley’s entire lawsuit

and ruled that RBS was not at fault nda

had not intimidated the borrower or

subjectedhimtoeconomicduress.

“The bank’s duty of skill and care did

not require it to negotiate the restruc-

turing any differently from the way it

didso,”thejudgeadded.

The judge noted that in 2006 the

original RBS loan of £75m had included

£15m-£20m for the personal use of

Mr Morley, who was then aged 35 and

single.

“He had worked hard to build up his

business and he wanted to enjoy this

new, albeit borrowed personal wealth,”

therulingsaid.

“He did not put any of it aside for a

rainy day. He spent it on South African

mining investments, property, cars, a

yacht and a jet. These assets turned out

not to be very liquid when the impact of

thedownturnhithome,”MrJusticeKerr

added.

“As the claimant said in evidence,

no one was buying yachts or lending

much against properties in 2010,” the

judgesaid,addingthat,ifMrMorleyhad

kept £5m in reserve, he might have

retained ownership of his property

portfolio.

Mr Morley’s spokesman declined to

comment.

BS welcomed the ruling. It said:R

“The judge found that the bank

dealt with Mr Morley — a sophisticated

business customer — in accordance

with the terms of their contractual

agreement following a breach of

covenant and in a manner that was

rationally connected to its commercial

interests.”

Banks

Developer who sued RBS over £75m loan loses lawsuit

A L I STA I R G R AY— N E W YO R K

The scale of the upheaval across much

of the US retail sector has been laid

bare by figures showing that about one

in 10 listed companies has gone bank-

rupt since 2008 and the value of shop-

ping malls has tumbled 30 per cent in

thepastthreeyears.

Abouthalfofdepartmentstores nmallsi

are predicted to close and another

500,000 retail jobs cut by 2025 in two

industry reports that warn the disrup-

tionissettoaccelerate.

Retailsalesoverallhavebeenbuoyant

as shoppers have moved online, but

trade credit insurer Euler Hermes said

the rise of ecommerce had benefited a

small number of companies and hurt

profitabilityacrossmuchofthesector.

Amazon illthisweekprovidedetailsw

of its performance over the holiday

shopping season, which founderJeff

Bezos ash described as “better than

ever”. The group is forecast to record a

19 per cent year-on-year rise in quar-

terly revenues to a record $86bn,

althoughtherolloutofone-dayshipping

isexpectedtodentprofitmargins.

The earnings report was likely to

show that Amazon’s retail business was

“accruingmost of the benefit” from an

industry-wide spike in online orders,

saidYoussefSquali,analystatSunTrust.

Holiday ecommerce salesjumped

nearly 19 per cent, according to Master-

card.

Euler Hermes, whose report excluded

food and drug retailers, found online

shopping had pressured margins across

the sector. Pricing pressure has intensi-

fied and retailers have had to invest in

technology and logistics while contend-

ingwithhigherdeliverycosts.

It said profit margins at more than

two-fifths of US-listed retailers had con-

tracted since 2008 while about a tenth

hadfiledforbankruptcyprotection.

In a sign of growing concern in the

property industryoverthe fallout, real

estate consultants Green Street warned

in a separate report that US shopping

mallswerefacinga“deathspiral”.

Shopping mall alues hadv dropped

about 30 per cent since a peak reached

three years ago, which it said was an

“unprecedented decline in an economic

expansion”.

While ecommerce accounted for

about 11 per cent of total retail sales, it

noted, its share for products typically

purchased in shopping malls was about

25percentandtheconsultancyforecast

thiswouldriseaboveathirdby2024.

Department stores in particular have

struggled to adapt and still occupied

more than 250m sq ft in US malls, about

30 per cent of the total, Green Street

said. Sears and JCPenney, two of the

worst-performing chains, alone account

foraboutatenth.

“Fundamentals for lower-quality

malls are deteriorating quickly,” Green

Street added. “Accelerating department

storeclosuresareinevitable.”

While some chains, such as digitally-

native retailers, were expanding, they

were “not interested in taking space in

these [weaker] properties at almost any

rent” and there were limited options to

convert unpopular sites to be used by

othertypesoftenant.

Retail

Depth of US stores’ woes revealed as bankruptcies surge

Shopping malls are suffering as

customers stay home and buy online

‘He spent it on South

African mining

investments, property,

cars, a yacht and a jet’

Banking Weekly podcast

The FT banking team discuss

the biggest stories of the week

ft.com/podcasts

Contracts & Tenders

Legal Notices

JANUARY 28 2020 Section:Companies Time: 1/202027/ - 19:41 User:andrea.goddard Page Name:CONEWS3, Part,Page,Edition:LON , 18, 1