Pallinghurst wins 61% support for controversial Gemfields bid

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PALLINGHURST Resources has claimed enough support to make its $150m all-share offer for Gemfields unconditional with just over 60% of total shareholders in the UK-listed coloured gemstones miner and marketer supporting the proposed transaction.

“As for 5.40pm on June 16, Pallinghurst has received valid acceptances in respect of 77,888,324 Gemfields shares representing approximately 14.16% of the existing issued share capital of Gemfields,” the company said in an announcement to the Johannesburg Stock Exchange today.

Including the 47% of shares Pallinghurst already owns in Gemfields, total acceptances had come in at 61.25% to date.

“With this acceptance into the Gemfields offer, ahead of the general meeting, Pallinghurst now exceeds the minimum level of support required for the offer,” said Johannes van Niekerk, a spokesman for the company. “The other notices of irrevocable support in addition remain available to vote in favour of the offer at the Gemfields general meeting.”

The acceptances were from shareholders who had already provided irrevocable support for Pallinghurst’s offer launched on May 19, including NGPMR, Investec and South African entrepreneur Christo Wiese. However, the irrevocable undertakings cease to be binding if, among other conditions, a rival offer with a 10% premium is tabled.

Gemfields announced last week that a Chinese company called Fosun Gold, a subsidiary of Fosun International, was considering making a rival bid for the coloured gemstones firm at a 10% premium to the Pallinghurst offer. Arné Frandsen, CEO of Pallinghurst Resources, said he was unaware of the status of the Fosun offer. “It is just an indication they may or may not make an offer. So we will have to wait and see,” he said.

In terms of the offer, should Pallinghurst win up to 75% of shareholder support, it will be able to de-list Gemfields from the UK’s AIM; if 90% accept the offer, Pallinghurst must extend it to the balance of minority shareholders.

Pallinghurst’s offer for Gemfields attracted the criticism of an independent committee established by Gemfields which said it undervalued the company and exchanged liquid shares in a UK-listed company for an illiquid counter on Johannesburg.

In posting its shareholder circular last week, Pallinghurst said that the first closing of its offer was scheduled for July 4. It launched a bid for the shares it didn’t already own in Gemfields on May 19 in a ratio of 1.91 new Pallinghurst shares for each Gemfields share.

“The unsolicited offer would appear to be driven by Pallinghurst’s proposed restructuring which seeks to preserve the Pallinghurst investment managers’ own self-interests at the expensive of the independent shareholders of Gemfields,” said the committee. It 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 is that Gemfields’ share price had under-performed for years and the company, which already owns 47% stake in Gemfields, had tired of financing the under-performance.

4 COMMENTS

  1. Pallinghurst management can hardly be worth the millions of $’s they have been paid the past 10 years! I can’t believe sane shareholders would vote (never mind irrevocably) to retain them at hefty cost to ALL shareholders. Gemfield shareholders converting into Pallinghurst get the weight of Arne and his other friends on their shoulders. Disgrace! Hopefully this deal gets exposed in time for the sham and shame it is! Gilbertson closes an illustrious career off with this!

  2. Gilbertson Gupta and his cronies (the 5 Pallinghurst management partners) have taken $44m as fees from Pallinghurst over the last 10 years. (yes we’ve done the math!). That’s R560m or R56m per annum per partner – 5 of them so thats R11 per person per annum. For doing a horrendous job on Pallinghurst. They too earned fees from their other co-investors – ca.$1.2bn committed from AMCI, EMG, Posco, APG, Temasek, Smevdig Capital and Investec. if that’s a 2%/20% deal (as moist PE deals are) then they possibly made a further $1.2bn*2%*10 years = $240m.
    total ±$300m – nice work if you can get it and get away with it.

    Has anyone looked at the Pallinghurst circular? going forward they want the 5 members to each earn $50k per month = total $3m per annum for services that they don’t need, plus then another $3m in bonuses if the share price increases by a measly 25% = total now $6m pa in Salaries and bonuses. And then they each get 2% in equity locked in at today’s low prices for a total of 10% of the company. The remaining management (including all of Gemfields management – if Gemfields goes ahead) will only have an allocation of a further 2% of the company (total 12% share incentive scheme) the Pallinghurst partners take 83% of the cake!. GREEDY Brian Gilbertson, really how much is enough?

    Dave If you think Pallinghurst has a battle with winning Gemfields they are going to have a battle with the special resolution to convert the fund into an evergreen grave train for their own benefit. This is the real story you should be writing about instead of idolizing GilboGupta.

  3. Why would some Gemfield shareholders swap into PGL when there i a higher offer by a Chinese company? This whole transaction starting to smell and look like there is a dead rat in it somewhere!

  4. Everyone by now knows pallinghurst are crooks and are unethical thieves. The issue is that some SA shareholders think they can keep exposure to Gemfields via Pallinghurst. Yes sounds great in theory, but the reality is a leopard doesn’t change its spots. Gilbertson and his kid will run it into the ground. And if for some reason they don’t…. you can be sure as a minority you won’t receive any of the value.

    What is bemusing to me is that a guy with solid a reputation like Christo Wiese would support Pallinghurst.

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