Coloured gemstone producer Gemfields is now the at the centre of what appears to be developing into a boardroom battle for control, with the company announcing that it was considering an offer by Hong Kong-based Fosun Gold to buy out the minority shareholder stake.
Majority shareholder Pallinghurst Resources, which holds 47 percent of the the London-listed Gemfields stock, had made an unsolicited bid on May 19 this year, to buy out the minority shareholders and take the company private. Pallinghurst offered 1.91 new Pallinghurst shares for every Gemfields one.
Gemfields is capitalised at £194m ($247 million) on the London Stock Exchange against an implied Pallinghurst offer of £118m ($150 million). Shares fell 10 percent after the Pallinghurst offer was made public.
Angry minority shareholders rejected the bid and called for the board to fight it as they claimed the bid significantly undervalued the company. The Gemfields board, citing the unsolicited nature of the bid, asked shareholders to do nothing while it investigated the matter. After ascertaining the details, the board concurred with the minority shareholder view, saying the Pallinghurst bid undervalued the company. It again advised shareholders to not act on the bid.
The Gemfields board engaged advisors to explore the best options for its shareholders along with an independent committee that included Gemfields CEO Ian Harebottle. The advisors and the committee concluded that the unsolicited Pallinghurst bid was at the expense of Gemfields’ minority shareholders. They stated that Pallingurst was illiquid and that it had exposed Gemfields’ minority shareholders to volatile commodities like iron ore, in which Pallinghurst was invested.
The Fosun Gold bid is a solicited one that resulted from the deliberations of the advisors and the committee. Fosun Gold has up to August 5 to formally lodge a competing offer for Gemfields.
Pallinghurst, for its part, says that Gemfields’ share price has underperformed for years and that it was tired of having to finance it.
https://www.gemkonnect.com/news/fosun-gold-makes-solicited-bid-heating-gemfields-takeover-battle