Shares in Gemfields PLC (LON:GEM) nudged higher this afternoon after the ruby and emerald miner’s board recommended an improved cash offer from Chinese conglomerate Fosun.
Fosun – led by billionaire Guo Guanchang – originally proposed a 40.85p a share bid when it approached Gemfields last week, but has now lodged a firm cash offer of 45p which values the company at £256mln.
That’s 18% higher than the nil-premium offer put to shareholders last month by Pallinghurst, which is looking to snap up the 53% of Gemfields it doesn’t already own.
Pallinghurst’s all-share bid currently works out at around 38.1p, which Gemfields has once again labelled as “unsolicited” and “derisory” today.
“Given the challenges that the Pallinghurst offer poses to the independent future of the company…, the Independent Committee intend to recommend that shareholders accept the Fosun offer so as to secure a relatively more attractive outcome for their investment,” AIM-listed Gemfields said in a statement today.
Chief executive Ian Harebottle and chief financial officer Janet Boyce have already pledged to give their backing to the bid.
Given their co-investment arrangements, the two directors have stepped down from the Independent Committee.
Gemfields investors have a choice to make
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.
Pallinghurst had previously said it received irrevocable undertakings from certain investors which meant its offer would have the support of shareholders representing more than 75% of the share capital.
With that level of support, Pallinghurst would be able to de-list Gemfields and merge it into its own operations relatively unchallenged.
However, those irrevocable undertakings cease to be binding when there is a rival offer at a greater than 10% premium (as Fosun’s is) and that hasn’t been matched by Pallinghurst within seven days.
Essentially, Pallinghurst have seven days to match or better the Fosun offer, otherwise the shareholders it originally had on board could side with Fosun instead.
Gemfields shares gained 4.6% to 42.5p.