Independent committee says Pallinghurst’s offer ‘significantly’ undervalues Gemfields

JOHANNESBURG (miningweekly.com) – An independent committee set up by Gemfields to evaluate Pallinghurst Resources’ unsolicited offer to acquire the remaining interest in the company it does not already own, has said the offer “significantly” undervalues Gemfields, its assets and its leading position in the coloured gemstone sector.

Brian Gilbertson’s Pallinghurst on May 19 announced its intention to buy out Gemfields’ minority shareholders in exchange for $150-million in Pallinghurst shares and to delist Gemfields from the LSE’s Aim market.

This comes as Pallinghurst, which already owns 47% of Gemfields, seeks to transition to a diversified miner from its current role as an investment fund.

“The independent committee is unanimous in concluding that the unsolicited offer from Pallinghurst is derisory and clearly undervalues the company. The company has an exceptional management team with a clear strategy to deliver additional shareholder value on a standalone basis from our unique asset base.

“The independent committee believes the unsolicited offer has the potential to dilute Gemfields’ shareholders with inferior assets that offer exposure to more volatile commodities and with less attractive prospects,” committee chairperson Graham Mascall said in a statement to Gemfields shareholders on Wednesday.

The committee, which also includes Clive Newall, Finn Behnken, Ian Harebottle and Janet Boyce, advised Gemfields’ shareholders not to take any action on the proposed offer.

Analysts at SP Angel, meanwhile, commented in a note on Wednesday that there is "tremendous unrealised value in the Faberge brand", which is owned by Gemfields.

"Pallinghurst understands the value of the Faberge brand and how to use it to create value, particularly in the event of a potential sale to a brand leader like LVMH, De Beers or Gucci.

"We currently value Gemfields at 70p a share on its mining business. We reckon there is potential to realise a further 18p a share on the sale of the Faberge business and that a good sale of Faberge by Pallinghurst might effectively pay for the majority of its acquisition of the cash generative mining business," the analysts added.