Gemfields plc (LON:GEM) responded to the offer made earlier by major shareholder Pallinghurst to acquire all shares it doesn't already own, saying it was reviewing the take-over bid and urged shareholders to take no action.
Pallinghurst already has a 47.09% interest in the gemstone group.
It says it has already received irrevocable undertakings amounting to just over 28% of Gemfields share and, added to its current holding, amounts to 75.27% of the total share capital of Gemfields. Therefore, the offer has become unconditional.
Gemfield board urges no action...
In a brief statement, Gemfields said Pallinghurst had not "engaged" with the firm with respect to the 'unsolicited offer' and the board strongly advises its shareholders to take no action at this time.
Under the terms, each Gemfields shareholder will be entitled to receive 1.91 Pallinghurst shares.
Based on the closing price of Pallinghurst shares on May 17 and exchange rate of R17.14 to £1, this values Gemfields at around £211.5mln or 38.5p a share, which is effectively at a nil-premium. Gemfields shares are currently up 1.64% to stand at 38.75p.
Following the completion of any transaction, Pallinghurst intends to delist Gemfields shares from AIM, and will consider a premium listing on the LSE’s main board.
Pallinghurst believes the proposed restructuring and integration of Gemfields will enable Gemfields to perform to its full potential.
Gemfields remains an attractive and unique business, it says, but will continue to be constrained by limited access to equity and debt capital, low liquidity in the trading of its shares, and a high cost base, and hence depressed profitability, says Pallinghurst.
Yuen Low, at broker Shore Capital, notes that according to Pallinghurst, the lack of premium to the offer is because including Pallinghurst co-investors, it effectively has around 73% interest and the combination of the firms would unlock vale which will fairly benefit both sets of shareholders.
Majority of shareholders already accepted..
The majority of Gemfields shareholders have already accepted the offer, with the two largest minority holders having already provided irrevocable undertakings, it said.
With these, and its current holding, Pallinghurst has control of 75.26% of Gemfields total capital.
From the outset, Pallinghurst has been a controlling shareholder of Gemfields, and it was through the investment firm Pallinghurst, led by former BHP boss Brian Gilbertson that, Gemfields got its hands on the famous luxury brand Fabergé (Pallinghurst had a controlling stake)
Gemfields bought the famous egg maker in 2012 in an all-share deal, which valued the historic brand at around $142mln (£89mln).
Pallinghurst had bought the Faberge brand in 2007 for US$38 million from Unilever (LON:UNLV), which had focussed Fabergé mainly on perfumes.
Pallinghurst had intended to relaunch the group as a luxury jewellery maker, using gemstones sourced from its other investments.
Meanwhile, Gemfields was formed and admitted to AIM in 2005 and it bought the Kagem emerald mine, Zambia three years later.
A sparkling emerald auction..
Earlier, Gemfields revealed it had delivered a sparkling result at its latest emerald auction in India, where all of the lots were sold at near-record pricing..
Revenues from the sale in Jaipur between May 15 and 18 came in at $ 14.5mln and the average price realised per carat was US$ 4.68 - the second highest average price achieved for a commercial quality emerald auction
The firm offered 3.10million carats from its Kagem mine in Zambia and all were sold - a first for such an auction.
Chief executive Ian Harebottle said: "With 100% of the lots sold at near-record pricing, Jaipur has delivered a very positive result indeed.
"We experienced strong demand for Gemfields' emeralds, with a significant number of new customers wishing to attend the auction."
He added that the main driver for the healthy appetite seen by the firm remained the "continued increase in global demand for coloured gemstones".
"This is further supported by an ever-increasing number of discerning customers and high-end brands...," he added.
The auction was Gemfields' third and final auction of Kagem production in the current financial year and saw 33 companies placing bids.
Its 25 auctions of emeralds and beryl mined at Kagem since July 2009 have generated US$ 473.5mln in total revenues.