By Euan Rocha and Michael Erman
TORONTO/NEW YORK (Reuters) - Barrick Gold Corp
Sources familiar with the situation say banks underwriting the deal have struggled to sell as much as a third of the shares on offer. Investors have become increasingly concerned about Barrick's governance, especially what many see as the board's lack of independence and Munk's dominant role in the boardroom.
Munk, who turned 86 on Friday, has always driven Barrick's agenda: he started the company in 1983 and forged it into the world's largest bullion producer. Along the way, he has built a reputation as a visionary in the mining industry.
Recent missteps, however, include a disappointing bet on copper, ballooning costs at its Pascua-Lama project in the Andes and a huge signing bonus for his heir apparent. These have prompted some investors to question his leadership.
In an amended regulatory filing relating to the equity offering - one of the largest in Canadian history - Toronto-based Barrick said it is working to address shareholder concerns. It indicated that Munk is likely to bow out by the time of the annual meeting, which is likely to take place in April.
"The board is addressing the issues that have been raised with our directors, which include modification of the company's executive compensation arrangements, the rejuvenation of the board through a combination of departures from the board, the addition of independent directors and succession in the chairman role at the company, consistent with Mr. Munk's desire to retire as chairman of the board," the filing said.
Barrick said it intends to update the market before year-end on those initiatives as well as governance changes expected to take effect in conjunction with the annual meeting.
Barrick has hinted in the past that Munk was likely to leave soon, but the company had been vague about the timing. On Friday, it said the filing was meant to clear up confusion in the market around the timeline for Munk's departure, even though it stopped short of specifying an exact date.
Sources familiar with the situation have also told Reuters that Barrick is likely to formally announce changes to the board, including Munk's departure, around the end of the year. Those changes are likely to take effect after next year's meeting.
According the several sources familiar with the deal, the $3 billion offer - being run by Royal Bank of Canada
The company, which has amassed a massive debt load of over $14 billion, is using proceeds from the offering to pay down some of its debt in the face of declines in the price of gold.
Barrick's New York-listed shares have traded well below the offer price of $18.35 through much of this week. With the highly liquid stock available at better prices on the open market, many have had little reason to buy shares at the offer price.
Barrick shares, which have fallen 46 percent in the last 12 months, closed up less than 1 percent at C$19.07 on the Toronto Stock Exchange on Friday.
Long-term investors such as pension funds that are value-focused are attracted to the offering given the stock's decline, according to one source, but some of these investors are the ones that have had the biggest reservations around the corporate governance issues within the company.
A source at a large Canadian pension fund declined to say whether the fund would buy into the offering now that Munk has signaled a timetable on his departure. But the source said that addressing corporate governance issues would go a long way toward improving the value of the company in the long term.
Barrick's board opted to go with this financing deal at the last minute, according to several sources, choosing it over a plan put forward by its traditional lenders, including Bank of Nova Scotia
Two sources familiar with the matter said the financing deal was brokered by Barclays Canada Chair Michael Wilson, a former Canadian minister of finance under then-Prime minister Brian Mulroney, who now sits on Barrick's board.
RBC declined to comment on the deal. GMP and Barclays could not immediately be reached for comment.
The Wall Street Journal, citing unnamed sources, said on Friday that Mulroney and Howard Beck - both long-time directors on Barrick's board - also indicated they may step down from the board. Neither of them could be reached for comment.
Barrick faced a minor shareholder revolt at this year's annual meeting, with around 85 percent of its shareholders opposing its nonbinding resolution on executive compensation.
The revolt began after a group of Canada's top pension funds publicly opposed a $11.9 million signing bonus for Co-Chairman John Thornton, the man tipped as the miner's next chairman.
Proxy advisory firm Glass Lewis, earlier this year, advised its clients to withhold votes from three directors, as the board does not have a two-thirds level of independence.
The generous bonus for Thornton was a particular focus of investor discontent, given problems that have plagued Barrick for months, including ballooning capital costs at Pascua-Lama, a mine it was building on the border of Chile and Argentina.
Last month, Barrick said it would stop development of Pascua-Lama indefinitely, a surprise reversal on a project that has already cost it more than $5 billion.
Investors have also taken umbrage with Barrick's disappointing push into copper through its C$7.3 billion ($7 billion) takeover of Africa-focused Equinox in 2011. Sources familiar with the matter have told Reuters that Munk himself played a pivotal role in pushing for the deal.
(Additional reporting by Allison Martell in Toronto and Clara Ferreira Marques in London; editing by Janet Guttsman, Andrew Hay, Peter Galloway and G Crosse)