What’s been happening at the Kimberley Diamond Company, owners of the Ellendale diamond mine in Western Australia and now the recipient of an opportunistic bid from the London based Gem Diamonds?
The company is struggling because of higher-than-expected mining costs and the impact of the surging Australian dollar.
Kimberley this week received a formal $300 million takeover offer from London-listed Gem. The 70c-a-share offer was foreshadowed earlier this week (it’s equal to the price at which Kimberley raised $14 million two months ago in May).
Kimberley’s shares traded as high as $1.80 in April of last year but hit a low last Friday of 45c amid some heavy selling. Trading in the shares was halted on Tuesday to complete the deal with Gem when the price had bounced to 68c on some apparently inspired trading.
To rise 50% in two days is certainly amazing, but it didn’t draw a ”what’s up?” from the ASX, or ASIC.
Gem has built up a 14.9% stake in Kimberley. But some around the market are wondering if there’s a bit of “how’s your father” going on with KIM shares. They point to the concerted selling of KIM shares last week, with the leading investment bank and broker, JP Morgan mentioned as being active in the market for KIM shares.
It has been buying and selling shares for most of the year, mostly recently last week when a change to a substantial shareholding notice was lodged which indicated that JP Morgan had fallen below the five per cent limit: it previous had a 5.4% stake. Another substantial shareholder, the AMP Society quit its 8.4% stake in June.
JP Morgan Cazenove (from London) is corporate broker to Gem.