There’s nothing better than a story that runs and runs. And that appears to be the case with the rapidly developing story of Dominion Diamond Corp. Suddenly, apparently out of nowhere, the mining firm appears to be a cherry that several companies are keen to pick. It has also raised the subject of the consolidation of the Canadian diamond mining industry, which has been regarded as inevitable by industry players for a number of years.
Developing a diamond mine and mining diamonds is extremely expensive. On the other hand, the two ‘book-ends’ of the industry – selling rough diamonds and retail jewelry – is where the profit is, while the manufacturers and others in the midstream get squeezed.
Just two weeks ago, Washington Companies informally offered $1.1 billion for Dominion. Dominion rejected the offer, saying the terms of the proposed talks were unusual and unacceptable and that the offer did not sufficiently recognize the value of the firm. Given that the offer provided a 35 percent premium to the firm’s share price before the bid, it would suggest that Dominion believes it can force a much larger bid from potential suitors.
Washington Companies had insisted on terms that would give it a free option and present significant risks to the company and shareholder interests, Dominion said, criticizing the “aggressive and off-market terms and conditions proposed by WashCorps in regards to its opportunistic indicative proposal”.
Specifically, WashCorps had conditioned an informal offer on a requirement for a lengthy period of exclusivity so that it could carry out due diligence, an insistence that it was free to veto Dominion’s choice of CEO, and a refusal to accept a customary form of standstill, the miner said. Washington Companies denied all of the claims and said that Dominion was denying significant value to its shareholders by its actions.
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