Sign up United Kingdom
Proactive Investors - Run By Investors For Investors
Why invest in GEM?
Gemfields PLC: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Bidding war on the cards as Gemfields receives more lucrative cash offer from China’s Fosun Gold

Fosun said its 40.85p a share offer is a "compelling cash alternative"
rubies
INVESTMENT OVERVIEW: GEM The Big Picture
Pallinghurst wants to overhaul and integrate Gemfields in order to boost performance

Shares in Gemfields PLC (LON:GEM) boomed this morning as the ruby and emerald miner looks set to be thrust into the middle of a bidding war.

Chinese conglomerate Fosun Gold has approached miner with a more lucrative cash offer than had already been put on the table by its largest shareholder, Pallinghurst Resources.

READ: Gemfields receives nil-premium bid from main shareholder

Fosun – which is run by billionaire Guo Guangchang – is offering Gemfields shareholders 40.85p in cash, which values the miner at around £225mln.

That’s 10% higher than the nil-premium offer put to shareholders last month by Pallinghurst, which is looking to acquire the 53% of Gemfields it doesn’t already own.

Pallinghurst is looking to pay off shareholders with its own shares as part of any deal, and Fosun said its bid was “a compelling cash alternative at a significant premium to the Pallinghurst offer”.

Pallinghurst has so far declined to comment on Fosun's proposed offer. It is thought that the private equity group - as a big Gemfields shareholder itself - is unlikley to consider a sale of its stake while it seeks to push through a deal itself.

Gemfields operates two mines in Mozambique (Montepuez) and Zambia (Kagem) and produces almost a third of the world’s coloured gemstones.

Gemfields at loggerheads with Pallinghurst

Fosun’s interest comes a few weeks after Gemfields largest shareholder, Pallinghurst, lodged its “unsolicited offer” for the emerald and ruby miner.

Pallinghurst – run by former BHP Billiton plc (LON:BLT) boss Brian Gilbertson – is at loggerheads with the company, which it feels has underperformed in recent years.

It wants full control of Gemfields, arguing that the miner continues to be constrained by limited access to equity and debt capital, low liquidity in the trading of its shares, and a high cost base, which has affected its profitability.

Under the terms of its offer, each Gemfields shareholder would be entitled to receive 1.91 new Pallinghurst shares for each Gemfields share.

Based on yesterday’s closing price, that works out at roughly 36.5p a share.

The private equity firm believes the overhaul and integration of Gemfields would allow it to perform to its full potential.

Gemfields and minority investors not happy

Following the offer, Gemfields set up an independent board of directors which essentially included everyone but Pallinghurst’s representative – Gilbertson’s son, Sean.

They advised shareholders against approving the offer, claiming that it “significantly undervalues the company, its unique asset base and its leading position in the coloured gemstone sector”.

READ: Gemfields management fights back against takeover bid

READ: Directors advise against Pallinghurst takeover offer

Minority investors have also slammed the bid as “opportunistic”, pointing out that most of Gemfields’ underperformance stems from its loss-making Faberge luxury jewellery unit.

Pallinghurst sold Faberge, famed for its intricate, jewelled Russian Imperial eggs, to the company in a controversial £90mln deal in 2012.

One shareholder told The Telegraph earlier this month: “It is completely outrageous Pallinghurst blaming Gemfields for poor performance after what they did to it saddling it with Faberge.”

Major shareholders seem a little bit more willing to embrace the approach. According to Pallinghurst it has received assurances from shareholders representing more than 75% of Gemfields’ share capital that they would accept the offer.

It’s uncertain whether that is still the case following the new, higher offer put forward by Fosun today. Pallinghurst was unavailable for immediate comment.

Shares are currently up 13.9% to 40.4p.

--Updates for share price and additional info--

View full GEM profile View Profile

Gemfields PLC Timeline

Related Articles

Bag of diamonds
July 06 2018
In a production update, the AIM-listed diamond miner said production in the first half of the year was up 81% year-on-year at 73,028 tonnes
Richland
April 03 2018
The strategic review aims to assess how the company can best leverage its position as the owner of one of the world's largest sapphire mines.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use