Rockwell tus­sle hot­ting up

Finweek English Edition - - The Company You Keep -

IT MAY HAVE TAKEN di­a­mond miner Rockwell a while to re­spond to the hos­tile bid from Pala In­vest­ments, which I wrote about the other week, but it’s cer­tainly come out fight­ing at last. Rockwell points out its price traded at the of­fer price of 36c/share (Cana­dian) as re­cently as 14 July and as high as C$59c (64% more than the of­fer) as re­cently as 13 March, sug­gest­ing the tim­ing of the of­fer is di­rectly re­lated to the re­cent mar­ket slump.

Fair enough. But when Rockwell com­plains Pala is “try­ing to buy a com­pany with an in situ di­a­mond value of ap­prox­i­mately US$1,1bn for $85,7bn” just what is it say­ing? That $1,1bn is equiv­a­lent to al­most $4/share but ig­nores all sorts of con­sid­er­a­tions.

Rockwell CEO John Bris­tow is more mod­est, say­ing in a we­b­cast only that Rockwell is worth “con­sid­er­ably more than $1/share”. But we know that mar­ket val­u­a­tions of any de­vel­op­ing re­sources com­pany are only a tiny frac­tion of the value of the re­source.

And though I have a high re­gard for Bris­tow’s younger brother Mark, CEO of Rand­gold Re­sources, I can see why he may not be con­sid­ered the best per­son to head an in­de­pen­dent as­sess­ment of the bid. It would surely have been wiser to ap­point some­one who couldn’t – how­ever un­fairly – be ac­cused of be­ing sus­cep­ti­ble to fam­ily pres­sure.

None of this mutes my orig­i­nal crit­i­cism of the bid, in par­tic­u­lar its con­tin­u­ing cav­a­lier treat­ment of its SA share­hold­ers. And I ac­cept that Pala’s lack of SA ex­per­tise could be a fa­tal de­fect. But I’m not sure that Rockwell’s man­age­ment re­alises just how vul­ner­a­ble it is.

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