Gemfields has received an unsolicited takeover offer from its largest shareholder, Pallinghurst Resources.
Pallinghurst currently owns 47.09 percent of the London-based gemstone miner. Pallinghurst said that it had received support from holders of another 28 percent of the company’s shares, meaning 75 percent of current shareholders back the deal.
The offer calls for Gemfields shareholders to receive 1.91 shares of Pallinghurst for their shares of Gemfields. A statement from Gemfields’ board “advises shareholders to take no action at this time.”
If the acquisition goes through, Pallinghurst, a Guernsey–based private equity firm, plans to:
– Delist Gemfields from the London Stock Exchange
– Focus on Gemfields’ core emerald operations in Zambia and ruby mine in Mozambique
– Explore strategic alternatives for Fabergé, the money-losing brand that was sold to Gemfields in 2012 by Pallinghurst
– Slash costs across the group, particularly in management and administration
Pallinghurst’s statement called Gemfields’ performance “disappointing,” noting that its share price has not budged much over the last decade. It argues it could help with one of Gemfields’ key problems: limited access to equity and debt capital markets.
Analysts and investors expressed outrage over the offer to The Telegraph, complaining it significantly undervalues the company. Some noted that the company’s main weak spot was Fabergé, and that brand was sold to Gemfields by Pallinghurst.
“It’s brazen,” one told the newspaper. “Pallinghurst are effectively buying the company for nothing.”
Pallinghurst CEO told Miningmx that his fund was tired of funding Gemfields as the share price sputtered.
“Gemfields [is] the key reason why shares in Pallinghurst have gone down,” he said. “I and my shareholders can’t accept that.”
In its last financial year (ended June 20), Gemfields posted a $23 million profit, but for the last six months, it posted a $13.6 million loss.