Dominion Diamond Corp. is expected to attract interest from the world’s largest diamond miners after being put in play Sunday by a $1.1-billion [U.S.] hostile takeover proposal from conglomerate The Washington Companies.
Dominion Diamond Corp. is expected to attract interest from the world's largest diamond miners after being put in play Sunday by a $1.1-billion [U.S.] hostile takeover proposal from conglomerate The Washington Companies.
Yellowknife-based Dominion owns stakes in the Ekati and Diavik diamond mines in the Northwest Territories, and caught the eye of the private Montana-based company controlled by billionaire Dennis Washington, who made his fortune in construction and now owns tugboats, trains and copper mines.
Washington held takeover talks with Dominion that stretched over three weeks, but broke down earlier this month. Washington went public Sunday with a plan to buy the diamond miner for $13.50 a share, a 36-per-cent premium on Dominion's Friday closing price. Dominion stock prices jumped 20 per cent yesterday on news of the offer.
Washington president Lawrence Simkins said in an interview that his company plans to install new leadership at Dominion.
Dominion is currently searching for a chief executive officer.
Mr. Simkins said Washington believes Dominion's mines have "intriguing" growth potential under private ownership and "it does not make sense for this company to be public." Washington does not own Dominion shares, and Mr. Simkins said an investment bank originally suggested making a takeover offer for the mining company.
Despite being rebuffed by the Dominion board, Mr. Simkin said: "We remain fully committed to completing this transaction."
Rival diamond-mining companies are also expected to take a long look at Dominion, which is broadly owned by institutional investors. Scotia Capital Inc. analyst Tanya Jakusconek said in a report that the mostly likely buyer is Rio Tinto Ltd., which already owns 60 per cent of the Diavik property and has previously stated it wants to expand its diamond business. Ms. Jakusconek also highlighted South Africa's De Beers Group and Russian diamond miner Alrosa as potential suitors.
Dominion said in a news release that it is "more than willing to consider all value-creating opportunities for the company" and said talks broke down this month in part because Washington asked for "a lengthy period of exclusivity" in takeover negotiations. Dominion's board of directors has hired TD Securities Inc. and law firm Stikeman Elliott LLP as its advisers.
Dominion also published robust estimates on future financial performance on Friday, including projections of a 62-per-cent increase in sales this year, to between $875-million and $975-million, based on increasing production and rising prices for diamonds.
Dominion's management has been in flux since late January, when CEO Brendan Bell, a former Northwest Territories politician, announced plans to step down in June because the company was moving its head office from Yellowknife to Calgary.
Dominion's share price is well below historic highs in the $40 [Canadian] range seen 10 years ago, when its predecessor acquired, then sold, the Harry Winston Inc. jewellery chain. In 2015, activist investor K2 & Associates Investment Management took a stake in Dominion and pushed for sale of the company. Toronto-based K2 continues to hold a 3-per-cent stake.
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Andrew Willis