Dominion Diamond to explore sale after US$1.1B offer

Toronto miner forms special committee to review options to maximize value

Dominion Diamond Corp. is looking for alternative bidders after receiving an unsolicited proposal from billionaire Dennis Washington to acquire the company last month for about US$1.1 billion.

The Toronto-based miner formed a special committee and is working with TD Securities Inc. to explore, review and evaluate a range of options for maximizing shareholder value, including a sale, according to a statement on Monday.

Dominion Diamond rose 1.82 per cent to close at $17.30 in Toronto. It closed at US$12.93 in New York, up 1.65 per cent.

“While the board of directors remains confident in the company’s long-term strategic plan and the opportunity it provides to enhance value for all shareholders, we are open to exploring all strategic alternatives,” James Gowans, Dominion Diamond chairman, said in the statement.

The new strategic review comes a little more than a year after Dominion launched a similar process, which didn’t result in a sale.

After the news of Washington Cos. proposal was made public last week, Dominion received several expressions of interest if it were to launch a formal sales process, according to people familiar with the matter.

Tanya Jakusconek, an analyst with Bank of Nova Scotia, said in a note to clients last week that Rio Tinto Plc, De Beers and Russia’s Alrosa Group may have an interest in looking at the company.

Rio has said it wanted to buy more diamond assets. The miner already owns 60 per cent of Dominion’s Diavik mine.

In 2015, it put together a proposal to buy the remaining 40 per cent stake held by Dominion along with a smaller development project, people familiar with the matter said late last year.

The plan was rejected internally before reaching the board level, the people said.

The Blackstone Group had also previously looked at the company, the people said.

Prior to the Washington proposal, Dominion Diamond had also been considering other transactions, including a merger with Canada’s Stornoway Diamond Corp., people familiar with the matter said this month.

Representatives for Dominion and Blackstone declined to comment.

The closely held Washington Cos. went public last week with the unsolicited proposal after talks with Dominion Diamond’s board broke off. Washington said it had made a cash proposal to buy the company for US$13.50 a share, a 36 per cent premium to the closing price before the potential deal’s details were made public.

Talks between the parties fell apart after they could not agree on the terms of a standstill agreement.

The company is also working with Stikeman Elliott LLP and Kingsdale Advisors. Paul, Weiss, Rifkind, Wharton & Garrison LLP is advising the special committee and the board of directors.