Dominion Diamond agrees to takeover

Toronto-based Dominion

Diamond Corp. on Monday agreed to a sweetened takeover offer of US$1.2 billion from U.S. billionaire Dennis Washington that will take private the world’s third-biggest diamond company by market value.

U.S.-listed shares of Dominion leapt 4.4 per cent to close at US$14.07, while its Toronto-listed shares rose 5.6 per cent to close at $17.85, after Dominion said Washington Companies will acquire all of its shares for US$14.25 per share in cash.

The offer price is fiveper-cent higher than the Missoula, Mont.-based company’s March 19 offer of US$13.50 a share, which Dominion rejected as too low.

Reuters reported Friday that Dominion was in advanced and friendly talks with Washington on a sweetened cash takeover bid.

M&G Investment Management, Dominion’s biggest shareholder with a 6.2-percent stake, supports the transaction, M&G fund manager Jamie Horvat said.

“Management and the board did a very good job of maximizing shareholder value,” Horvat said.

Washington Companies, founded by industrialist and entrepreneur Washington, has mining, industrial and transportation businesses across North America.

Dominion, which owns a majority stake in the Ekati mine and minority share of the Diavik mine in the Northwest Territories, launched a sales process in March following the initial unsolicited approach from Washington.

A competing bid for Dominion is unlikely other than from global miner Rio Tinto, Dominion’s joint venture partner at Diavik, BMO analyst Edward Sterck said.

“Rio Tinto’s involvement cannot be ruled out, but after exiting a period of asset shedding, management may feel that for a first acquisition to be in diamonds may not be digestible for investors,” Sterck said in a client note. Rio Tinto could not immediately be reached for comment.