Investor outrage at fund’s takeover bid for Faberge owner Gemfields

UK investors have reacted with fury to a “brazen” and “outrageous” takeover offer for mining company Gemfields, owner of the Faberge brand, by its largest shareholder.

Johannesburg-listed Pallinghurst Resources has launched an unsolicited bid for the 53pc of Gemfields it does not already own, valuing it at £211m. The offer, which contains no premium to Gemfields’ current share price of 38.8p, would result in investors receiving 1.91 shares in the enlarged company for each Gemfields share they own.

Under the plan, the miner – which produces around 30pc of the world’s emeralds and rubies from two mines in Mozambique and Zambia – would delist from Aim, although Pallinghurst may seek a secondary listing on the main London market.

Pallinghurst is an investment fund set up by Brian Gilbertson, who oversaw the merger of Billiton – which he ran – with BHP in 2001. Mr Gilbertson’s son Sean sits on the board of Gemfields, which is by far its most valuable asset.

Pallinghurst said its takeover of Gemfields would allow the miner to reach its “full potential”, arguing that it suffers from high costs and poor liquidity in the London market. The fund, which counts South African billionaire Christo Wiese as a board member, has secured backing from 75pc of Gemfields’ shareholders, so can technically push for the company’s delisting.

Minority investors slammed the fund for its “opportunistic” bid, and said most of Gemfields’ costs stemmed from the Faberge unit, which Pallinghurst sold to the company in 2013 in a controversial $142m (£109m) deal.

“I’m personally very angry,” said one minority investor who declined to be named. “Gemfields was doing well until its majority shareholder sold it Faberge, which was loss-making. It has two world-class assets but the company is haemorrhaging money because of Faberge.”

Faberge is estimated to have cost Gemfields $58m since its acquisition.

“The independent directors have a duty to come out and fight this very strongly,” the investor added. “It’s brazen. Pallinghurst are effectively buying the company for nothing.”

One shareholder said: “It is completely outrageous Pallinghurst blaming Gemfields for poor performance after what they did to it saddling it with Faberge.” Another said: “The low liquidity of the shares is Pallinghurst’s fault – they hold 47pc.”

Critics have pointed out that Pallinghurst’s offer does not take into account its stockpiles of gemstones, which could be worth up to $100m.

Gemfields’ board has asked shareholders to take no action while it considers the offer, adding that “Pallinghurst has not engaged with the company”.

Pallinghurst’s swoop came as Gemfields chief executive Ian Harebottle was in India announcing the results of the company’s most recent emerald auction, which raised $14.5m.