(IDEX Online) – After months of rumors, Dominion Diamond Corporation announced that The Washington Companies, a group of privately held North American mining, industrial and transportation businesses founded by industrialist and entrepreneur Dennis R. Washington, will acquire all of Dominion's outstanding common shares for $14.25 per share in cash or a total equity value of approximately $1.2 billion.

 

The transaction represents a 44 percent premium to Dominion's unaffected share price of $9.92 on March 17. The transaction marks the result of Dominion's review of strategic alternatives as previously announced on March 27.

 

Dominion's directors, after consultation with financial and legal advisors, and based on the recommendation of a special committee of the Board consisting of four independent directors, unanimously approved the deal and recommends that Dominion's shareholders approve it. All directors of the company have entered into support agreements to vote their common shares in support of the deal.

 

"Dominion Diamond has an excellent collection of mining assets and a talented and experienced management team and workforce," said Lawrence R. Simkins, President of Washington. "We are excited to work with their team to extend the mine life of the Ekati mine and continue partnering with Rio Tinto in the operation of the Diavik mine, while maintaining long-term employment for Dominion employees. The Washington Companies has a long track record of building businesses throughout North America, significant experience in mining as well as operating its investments in Canada, and a decades-long investment horizon. We share a commitment to providing long-term benefits to all Dominion stakeholders and to the Northwest Territories and its local communities."

 

"The Washington offer delivers compelling and immediate value to Dominion shareholders at an attractive premium that recognizes the intrinsic value of Dominion and provides shareholders certainty through an all-cash offer," said Jim Gowans, Chair of the Board of Dominion Diamond Corporation. "This offer is the result of a robust strategic review process and the Board unanimously agrees that this offer represents the best option available to Dominion shareholders, and recommends that shareholders vote in favor of this transaction."

 

Added Gowans, "Dominion also believes this transaction is an excellent outcome for the company's stakeholders, including employees, community members and the Northwest Territories. The transaction allows the operation to take the next steps in mine development and ensures mining and its associated benefits continue in the North for decades to come."

 

"The Washington Companies' commitments to safety, operational excellence, innovation and world-class management teams position us favorably for long-term success at the Ekati and Diavik mines for the benefit of all Dominion Diamond stakeholders," added Dennis Washington, founder of The Washington Companies. "I look forward to the next chapter of continuing to build and support successful, safe business operations in the Northwest Territories."

 

As part of the acquisition, Washington plans to:

•      Operate Dominion as a standalone business as Washington does with its other successful operating companies;

•      Appoint a new CEO based in Canada to the Dominion management team;

•      Keep Dominion's headquarters in Canada and maintain a significantly Canadian management team;

•      Deploy capital to develop both the Jay and Fox Deep projects;

•      Make new investments in a reinvigorated greenfield exploration program;

•      Maintain a high level of environmental stewardship through all phases of its operations;

•      Provide ongoing and long-term employment for skilled, high-paying jobs at Dominion;

•      Maintain focus on the recruitment, training and employment of Indigenous people;

•      Honor the existing commitments to the Indigenous communities to ensure their interests are protected;

•      Continue with scholarship programs and heritage funds to assist with social, recreational, and community development programs;

•      Provide ongoing support for local suppliers and contractors, including Indigenous businesses; and

•      Continue to promote Dominion's CanadaMark brand for its ethically sourced and premium Canadian diamonds.

 

Arrangement Agreement

 

The Arrangement Agreement is subject to customary non-solicitation provisions, including Dominion's right to consider and accept superior proposals. In the event of a superior proposal, Washington will have a five business day right to match the superior proposal. If the Arrangement is not completed as a result of a superior proposal, the company will be required to pay Washington a termination fee equal to $43.9 million (or approximately 3.75 percent of the equity value).

 

The closing of the Arrangement is subject to the approval of at least two-thirds of the votes cast at a special meeting of Dominion shareholders to be called to consider the Arrangement, the company having a minimum cash balance of $150 million if closing is on or before November 30, or $200 million if closing is after November 30, and certain other customary closing conditions, including court approval, approval from the Minister of Innovation under the Investment Canada Act and the Commissioner of Competition under the Competition Act, and the absence of any material adverse effect with respect to the company. In connection with the transaction, Dominion will suspend the declaration and payment of dividends on Dominion's shares and has terminated its Normal Course Issuer Bid. The transaction is expected to close in the fourth quarter of 2017.

 

Should Washington be unable to complete the Arrangement due to a funding failure, or in other limited circumstances, Washington will be required to pay the company a reverse termination fee equal to $70.2 million (or approximately 6.0 percent of the equity value).

 

Washington is highly committed to strong environmental stewardship, reclamation obligations and safety culture, as is Dominion. As part of the transaction, the strong environmental bonding obligations of Dominion will remain unchanged, the joint statement added.