12th Sep 2008 07:00
12 September 2008
GEMFIELDS RESOURCES PLC
PROPOSED OFFER FOR TANZANITE ONE LIMITED
1. Proposed Offer
Gemfields Resources Plc (Gemfields) announces a proposed offer for Tanzanite One Limited (T1) of 45 pence for each T1 common share of US$0.0003 (T1 Shares) (the Proposed Offer). The Proposed Offer would entitle T1 Shareholders to elect to receive as consideration either cash or ordinary shares of GBP 0.01 each in the capital of Gemfields (Gemfields Shares), or any combination thereof. The Proposed Offer would be reduced pro rata should T1 pay any dividend or make any other payment to shareholders prior to completion.
The Proposed Offer values the whole of the issued common share capital of T1 at approximately GBP 33 million representing a premium of approximately 76.5 per cent. over the middle-market quotation of a T1 Share of 25.5 pence at the close of business on 29 August 2008, the last dealing day before Gemfields' recent acquisition of T1 Shares.
T1 shareholders electing to receive Gemfields Shares for all or part of their T1 Shares will receive 1.4 Gemfields Shares for each T1 Share, equivalent to 32 pence for each Gemfields Share. The 30-day and 60-day volume weighted average share prices for Gemfields were 32 and 34.4 pence per share respectively at the close of business on 29 August 2008 (the last dealing day before Gemfields began acquiring shares in T1). Gemfields completed a GBP 30 million placing in June 2008 at 45 pence per Gemfields Share.
On 1 September 2008 Gemfields purchased 7.5 million T1 Shares at 30 pence per share and a further 0.5 million T1 Shares at 37 pence per share on 2 September 2008. Pallinghurst Resources (Guernsey) Limited (Pallinghurst), a related party of Gemfields, owns a further 2.1 million T1 Shares. Together, these T1 Shares represent approximately 13.7 per cent. of T1's issued common share capital.
In addition, Gemfields has received a conditional irrevocable undertaking in respect of approximately 14 million T1 Shares to accept any offer by Gemfields at 45 pence per T1 Share, representing approximately 19 per cent. of T1's issued common share capital.
The T1 Shares owned by Gemfields and Pallinghurst, together with the irrevocable undertaking represent approximately 24 million T1 Shares, or approximately 32.6 per cent. of T1's issued common share capital.
Any offer will be subject to standard terms and conditions, including but not limited to, valid acceptances in respect of more than 50 per cent. of T1's issued and to be issued common share capital (including the T1 Shares already held by Gemfields and its associates), satisfactory due diligence information being made available to Gemfields by T1, the receipt of any necessary regulatory clearances and the admission to trading of any new Gemfields Shares to be issued as consideration. The Proposed Offer will be subject to any required Gemfields Shareholder approvals.
This announcement does not amount to a firm intention to make an offer. The proposal is at an early stage and there can be no certainty that any offer will ultimately be made, even if the above pre-conditions are waived.
Gemfields wrote formally to the board of directors of T1 on 2 September 2008 proposing an amalgamation of Gemfields and T1 and noting that this might best be achieved by Gemfields making an offer to T1 shareholders. The board of T1 have advised Gemfields that they will consider the proposal at their next meeting, scheduled for 19 September 2008. This announcement has been released by Gemfields at this time in response to market speculation regarding the acquisition of T1 Shares as mentioned above.
Subject to an equivalent reduction in the Proposed Offer price as referred to above, T1 Shareholders will be entitled to receive any interim dividend in respect of the half year ended 30 June 2008. In all other respects, T1 Shares will be acquired free from all liens, charges, encumbrances and other interests and together with all rights now and hereafter attaching thereto including the right to receive all dividends and other distributions hereafter declared, made or paid.
Gemfields has been advised that the City Code on Takeovers and Mergers does not apply to the Proposed Offer or any formal offer for the share capital of T1.
2. Background to and reasons for the Proposed Offer
The Board of Gemfields believes that the Gemfields group as enlarged by the acquisition of T1 (Enlarged Group) would unlock significant value for shareholders, given that, in its opinion, the Enlarged Group would:
be, by a substantial margin, the leading company in the sector with considerable critical mass in a highly fragmented industry characterised by small businesses;
create the world's leading miner of coloured gemstones with both open-cast and underground mining expertise, positioning the enlarged company as the partner of choice in exploiting other coloured gemstone deposits;
benefit from synergies in sales, branding and marketing (the enlarged customer base will create opportunities for cross-selling, with T1 able to leverage Gemfields' worldwide exclusive rights to the Fabergé brand and Gemfields' platform in India, and Gemfields able to benefit from T1's sales office in Dubai);
have the ability to market tanzanite using the Fabergé brand;
have improved prospects of applying for a listing on the Main Board of the London Stock Exchange in order to seek to further enhance valuation, liquidity and access to capital markets;
potentially enjoy improved levels of share trading liquidity compared with that presently experienced by either Gemfields or T1;
be seen as the supplier of choice for ethically supplied gemstones, covering two key premium coloured gemstone types;
benefit from the realisation of potential cost and operating synergies, which would include, but not be limited to mining, security, logistics, grading, cutting and polishing, sorting, parcel-making, marketing, sales and distribution;
have greater geographic diversity and reduced risk profile; and potentially re-rate strongly when capital markets recover.
3. Information regarding Gemfields
Gemfields, founded by its Executive Vice Chairman Rajiv Gupta, is a leading international coloured gemstone producer with assets in Zambia, Madagascar and India and is seeking to become the leading source of premium coloured gemstones through consolidation and vertical integration on an international scale. Gemfields' key producing asset is the 75% owned Kagem emerald mine in Zambia. Kagem is the largest non-diamond gemstone mine in the world.
In June 2008, Rox Limited (a portfolio company of Pallinghurst) acquired approximately 56 per cent. of Gemfields' issued share capital. Pallinghurst is chaired by Brian Gilbertson, the former CEO of BHP-Billiton plc.
In August 2008, Gemfields officially opened a wholly-owned cutting and polishing facility in Jaipur India, marking a significant vertical integration in the gemstone supply chain.
In September 2008, Gemfields became exclusively authorised by Fabergé Limited (an independent portfolio company of Pallinghurst) to use the Fabergé brand name on coloured gemstones, excluding diamonds. Gemfields intends that the Fabergé name be reserved for high-end, conflict-free and ethically mined gemstones of guaranteed provenance.
Further information relating to Gemfields can be found at www.gemfields.co.uk where, inter alia, a competent persons report on Gemfields' gemstone assets prepared by the mining consultancy SRK (dated 13 May 2008) can be downloaded.
4. Financing of the Proposed Offer
The Proposed Offer will be conditional upon, inter alia, the placing of new Gemfields Shares (Placing). Gemfields reserves the right to waive this pre-condition as the Placing will be fully underwritten as described below. The exact cash portion required depends on the extent to which T1 shareholders elect to receive cash rather than Gemfields Shares as consideration.
The cash resources required for the Proposed Offer will be procured from the following sources:
Rox Limited, a portfolio company of Pallinghurst, which owns approximately 56 per cent. of the issued share capital of Gemfields, has committed to subscribe, as directed by the Gemfields board, for up to US$ 50 million of new Gemfields Shares in the Placing at a minimum price of 32 pence per Gemfields Share; and
Gemfields' current cash balances.
Investec Bank (UK) Limited, in its capacity as financial adviser to Gemfields, confirms that it has reviewed the underwriting agreement between Rox Limited and Gemfields and furthermore has evidenced cash balances of £19 million in Gemfields. On this basis, Gemfields has sufficient resources to satisfy full cash acceptance of the Proposed Offer.
Application will be made for admission of any new Gemfields Shares issued pursuant to the Proposed Offer to trading on AIM. Any such new Gemfields Shares will be issued credited as fully paid and will rank pari passu in all respects with the existing Gemfields Shares.
Full acceptance of the Proposed Offer in the form of new Gemfields Shares rather than cash would involve the issue of approximately 89 million new Gemfields Shares, which would represent approximately 22 per cent. of Gemfields' enlarged issued ordinary share capital.
5. Overseas Shareholders
The availability of the Proposed Offer to holders of T1 Shares who are not resident in and citizens of the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are located or of which they are citizens. Such persons should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdictions. Further details in relation to overseas T1 Shareholders will be contained in any formal Offer document to be dispatched to T1 Shareholders.
The distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements.
The Proposed Offer is not to be made, directly or indirectly, in, into or from any jurisdiction where to do so would violate the laws in that jurisdiction. Accordingly, copies of this announcement and formal documentation relating to an Offer will not be, and must not be, mailed or otherwise forwarded, distributed or sent in, into or from any jurisdiction where to do so would violate the laws and/or regulations in that jurisdiction unless otherwise determined by Gemfields.
Notice to US investors
The Proposed Offer relates to the shares in a Bermudian company and is subject to disclosure requirements which are different from those of the United States. The settlement procedure with respect to the Proposed Offer will be consistent with UK practice, which differs from United States domestic tender offer procedures in certain material respects, particularly with regard to date of payment. Neither the Securities Exchange Commission nor any securities commission of any state of the United States has: (a) approved or disapproved of the Proposed Offer; (b) passed upon the merits or fairness of the Proposed Offer; or (c) passed upon the adequacy or accuracy of the disclosure in this announcement. Any representation to the contrary is a criminal offence in the United States.
6. General and Documentation
This announcement does not amount to a firm intention to make an offer. Any proposal is at an early stage and there can be no certainty that any offer will ultimately be made, even if all the pre-conditions are waived. Further announcements relating to the Proposed Offer will be made in due course.
Investec Bank (UK) Limited, which is regulated by the Financial Services Authority, is acting for Gemfields (and no-one else) in connection with the Proposed Offer and will not be responsible to anyone other than Gemfields for providing the protections afforded to customers of Investec Bank (UK) Limited nor for providing advice in relation to the offer.
7. Enquiries
Richard James, CFO Tel: +44 (0)20 7016 9416
Gemfields Resources plc
Gerard Kisbey-Green/Paul Gray/Avital Lobel Tel: +44 (0)20 7597 4000
Investec Bank (UK) Limited
Financial Adviser to Gemfields
Mike Jones/Tarica Mpinga Tel: +44 (0)20 7050 6500
Canaccord Adams Ltd
NOMAD and Joint Broker to Gemfields
Related Shares:
Gemfields Grou.