Gemfields’ (LON:GEM) buyout of iconic jewellery brand Fabergé, best known for its encrusted eggs, is transformational for the coloured gemstone specialist, in the eyes of JPMorgan Cazenove.
The heavyweight broker reckons the £89 mln all-share deal fits Gemfields’ longer-term strategic direction.
Analyst Alexander Mees said: “We believe the combination of the world’s largest producer of coloured gemstones with such an iconic jewellery brand creates significant additional opportunities to develop the global market for coloured gems and to achieve synergistic benefits at various key points in the supply chain.”
He adds that the plan to leverage Fabergé’s heritage and global luxury positioning over the next few years creates the possibility of long-term earnings and value generation.
As the transaction will be funded entirely from new equity – 214 mln new shares will be issued – Mees expects it to be dilutive to near-term earnings, however.
As a result the analyst lowers his earnings per share forecasts by 66% to 2.8 cents in 2014 and by 53% to 4.2 cents in 2015.
Gemfields’ chief Ian Harebottle described the deal as a no-brainer.
“From a business perspective it certainly makes a lot of sense,” the CEO said.
“You have Gemfields’ ability to create an aspirational component for our coloured stones at the very highest level, which we certainly believe will have a pull-on effect on all the production throughout the business.”
Shares dipped 0.5p to 36p each on Thursday.