Dominion Diamond Corp. shares surged 25 percent after billionaire Dennis Washington went public with a US$1.1 billion offer for the Canadian company after weeks of private talks hit an impasse.
Closely held Washington Cos. made the proposal to acquire Toronto-based Dominion Diamond for US$13.50 a share on Feb. 21. Dominion’s board has stalled on the offer, Washington Cos. said in a statement Sunday. The bid carried a 36 percent premium to Dominion’s closing price on Friday. The stock jumped to $12.40 before the start of regular trading in New York Monday from Friday’s closing price of US$9.92.
Washington Cos., which has interests in mining, marine and rail transportation and heavy equipment distribution, said it has a long track record of making businesses grow throughout North America, with expertise in the mining industry and the Canadian market. The company said Dominion’s board has refused to let it perform due diligence, which might lead to an increased offer.
“We are disappointed that Dominion’s board has thus far prevented Washington from moving ahead with its proposal under which shareholders would receive a substantial premium and immediate liquidity, but we remain fully committed to completing this transaction,” said Lawrence Simkins, Washington Cos.’ president, in the statement.
Dominion called the offer “unsolicited, conditional, and non-binding and said it offered no unique plans for the business.
“The board confirmed that WashCorps does not have any experience in the highly specialized diamond mining industry and marketing industry,” Dominion said in an emailed statement Sunday, adding that the expression of interest failed to recognize the value of the company. It nevertheless told Washington Cos. that it was prepared to engage in further discussions, including a necessary standstill and allow it to perform due diligence.
“WashCorps continues to demand, as a condition to any discussions, a lengthy period of exclusivity, as well as the ability to veto the board’s choice of new CEO,” the company said.
“In other words, WashCorps is seeking a self-interested ‘free option’ to learn of Dominion’s business and prospects, while paralyzing the company.”
Washington Cos. said it was particularly interested in developing Dominion Diamond’s Ekati Diamond Mine northeast of Yellowknife. Dennis Washington has a net worth of $4.6 billion, ranking No. 375 on the Bloomberg Billionaires Index.
Dominion Diamond has been the topic of takeover talk after the company hired Rothschild & Co. to explore a sale in 2015. That process failed to find a buyer. The company had been targeted at the time by a group of shareholders, led by Toronto-based hedge fund K2 & Associates Investment Management, who criticized the company’s management and business strategy.
In January, Dominion Diamond Chief Executive Officer Brendan Bell said he planned to step down at the end of June, citing personal reasons after the company decided to move its corporate offices to Calgary.
BDT & Co. is providing financial advice to Washington Cos. while Skadden, Arps, Slate Meagher & Flom LLP is the legal adviser in the U.S. Blake Cassels & Graydon LLP is providing legal advice in Canada.
TD Securities Inc. is acting as financial adviser for Dominion Diamonds while Stikeman Elliott LLP is providing legal advice. Kingsdale Advisors is acting as strategic adviser.