Gemfields Weighing Rival Offer from China’s Fosun

Mining and Exploration
14/06/2017 09:28

London-listed gemstones miner and Fabergé owner Gemfields said it has received an offer for the company from Chinese conglomerate Fosun International Ltd. Fosun made an initial proposal regarding a possible cash offer for the British precious stones miner, thereby emerging as a rival to Pallinghurst, whose recent takeover bid was considered to "significantly undervalue" the company. Gemfields said it was, “actively engaged in discussions with Fosun Gold regarding a possible competing offer for the entire issued and to be issued share capital of the company.”

The price of the offer is said to be a premium of 15.1 percent to Gemfield's closing price of 35.5 pence on Tuesday, and comes a month after its largest shareholder, South-African private equity group Pallinghurst, offered to buy out the company at its current valuation. Earlier this week, Gemfields said the approach was solicited after engaging with its advisors to, "explore ways to deliver maximum value for shareholders and to protect the interests of minority shareholders.” Gemfields said it was “actively engaged” in discussions with Fosun Gold over an offer for the company, believing it, "may lead to a cash offer at a superior value to Pallinghurst’s unsolicited offer.” The company had urged shareholders to take no action after the Pallinghurst offer, which remains open until 4 July.

Pallinghurst already owns 47% stake in Gemfields, and on May 19 launched a bid for the shares it didn’t already own in Gemfields in a ratio of 1.91 new Pallinghurst shares for each Gemfields share. Some twelve days later, Gemfields’ independent committee called the offer “derisory” and "seeks to preserve the Pallinghurst investment managers’ own self-interests at the expensive of the independent shareholders of Gemfields.” Gemfields' committee added Pallinghurst was illiquid and exposed minority shareholders in Gemfields to more volatile commodities such as iron ore in which Pallinghurst is invested.

Pallinghurst’s perspective, as miningmx explains, is that Gemfields’ share price had under-performed for years and the company had tired of financing the under-performance. “Gemfields has been on Pallinghurst’s books for 15 years and we have been its bank,” said Arné Frandsen, CEO of Pallinghurst Resources. “We are not getting a response. It is worth half of our value – the Pallinghurst share price is dependent on Gemfields – and its the key reason why shares in Pallinghurst have gone down. I and my shareholders can’t accept that,” he said.