AN independent committee formed by Gemfields has thrown down the gauntlet to Pallinghurst Resources by saying the Johannesburg-listed company may not win sufficient shareholder support for its proposed $268m takeover of Gemfields at its general meeting, scheduled for June 26.
The latest twist in a takeover battle underway since May 19, which is when Pallinghurst unveiled its all-share offer, Pallinghurst said it would lower the acceptance level in order to make the transaction unconditional to 60% from 75% so as to accommodate shares already pledged which totalled 61.4% as of today.
Pallinghurst owns 47% of Gemfields and wants to delist the company and roll it into its own structure which is also to be converted from a private equity firm to a common-and-garden operating firm. It needs 75% in order to delist Gemfields, a coloured gemstones mining and marketing firm.
However, the independent committee attracted a rival offer in cash at an 18% premium to Pallinghurst’s offer from Chinese company Fosun Gold which may well have given some shareholders who had signed irrevocable support for Pallinghurst food for thought. One of the conditions of the irrevocable undertakings supporting Pallinghurst’s offer is that they become non-binding in the event of a rival offer at a 10% or more premium.
Fosun Gold is a subsidiary of Fosun International, a conglomerate listed in Hong Kong which has offered to open the Chinese market to Gemfields range of emerald, ruby and sapphire jewellery.
Pallinghurst said last week it had received 61.4% irrevocable support from shareholders, including its own stake, but the number of shares hadn’t much improved this week as expected by the company.
Said the Gemfields committee: “Despite the irrevocable undertakings that Pallinghurst has received from certain Palllinghurst shareholders to vote in favour of the ordinary resolution to approve the offer, the independent committee believes … there is a possibility that Pallinghurst will not receive the necessary majority …”.
It added that Pallinghurst, if it fell short of 75% acceptance from all shareholders, would not be able to delist Gemfields from the Alternative Investment Market. “The potential inability for Pallinghurst to delist the company post closing would appear to be at odds with Pallinghurst’s rationale for the transaction as outlined in their circular to shareholders dated 2 June 2017,” the committee said.
Graham Mascall, chairman of the committee, said in a statement: “We are disappointed at the actions taken by Pallinghurst as they seek to prevent shareholders from having the opportunity to accept the certain cash offer from Fosun Gold at a material premium to the derisory Pallinghurst offer”.
“The independent committee continue to recommend Gemfields shareholders take no action in relation to the Pallinghurst offer,” he added.
