Dominion Diamond deal possible within weeks

Sweetened bid from U.S.-based Washington Cos. MINING

the world’s third-largest diamond producer by market value, is in advanced and friendly talks with the Washington Companies on a sweetened cash takeover bid, sources told Reuters this week.

Negotiations are currently focused on the two sides settling on a price, said the sources, who declined to speak publicly on the matter. A deal could be announced within weeks, they said.

Trade in Dominion shares on the Toronto Stock Exchange was halted pending news. The stock had gained as much as 4.74 per cent following Reuters’ report on the talks.

The U.S .- listed shares soared as much as six per cent to US$ 13.60, before edging back to close at US$ 13.48, or up 5.6 per cent, in trading Friday in New York.

It was unclear how much Washington Companies had increased its initial unsolicited cash proposal, of US$ 13.50 a share, which was the catalyst for Dominion to formally put itself up for sale in March.

At $ 13.50 a share, the acquisition would be worth nearly US$ 1.09 billion, or $1.38 billion Canadian.

Dominion, which owns a majority stake in the Ekati mine and a minority share of the nearby Diavik mine in the Northwest Territories, had rejected Washington’s initial advance, saying it undervalued the company and that the terms of proposed talks were unacceptable.

Washington Companies is a group of privately held North American mining, industrial and transportation businesses founded by industrialist and entrepreneur Dennis Washington.

Washington Companies declined to comment, while Dominion was not immediately available for comment.

Washington and other interested parties signed confidentiality agreements to review company data, Dominion said on May 1.

The sales process, a rarity in the tightly- controlled global diamond industry, attracted the Canada Pension Plan Investment Board ( CPPIB), sources told Reuters.

CPPIB was joined in the data room by small Canadian producer Stornoway Diamond.

It was unclear if Torontobased Stornoway, which held merger talks with Dominion earlier this year, or CPPIB had submitted formal bids.

CPPIB l ooked at Dominion’s books in 2015, sources said, when t he miner worked with investment bank Rothschild & Co. to consider ways to boost shareholder value, including a potential sale.

There has been ongoing market speculation that diversified global miners Rio Tinto and Anglo American were also eyeing Dominion.

Rio operates and holds a 60-per-cent stake in Diavik, while Anglo’s De Beers unit operates the Gahcho Kue diamond mine in the Northwest Territories.

Dominion hired TorontoDominion Bank earlier this year to run the sales process.