Diamond Circle Capital – The End?

(IDEX Online News) – Diamond Circle Capital is proposing to sell its diamond portfolio. In a letter to investors, DCC announced that Abdallah Chatila now holds a majority stake in the fund and that he intends to vote in favor of liquidation.

In early May, Chatila bought 1,272,615 DCC shares from Fortress, representing about 5.8 percent of the company's issued shares. He subsequently made a cash offer of $3.50 per share. At the time the share traded at $4.20 and DCC's board recommended to reject the offer.

DCC's net asset value per share, essentially the value of its diamond portfolio per share, exceeds $7, further making Chatila's offer unattractive. His offer was viewed by many as a way to get hold of a large portfolio of diamonds, at a near 50 percent discount.

As of March 2012, DCC had 11 diamonds, including a fancy red and a vivid blue, with an estimated total value of about $52 million.

The latest announcement that he now holds a 62.3 percent of the voting rights is a surprise.

DCC's board is proposing the liquidation of the diamond portfolio "in an orderly and timely manner and returning the net proceeds of sale to Shareholders at such times and in such manner as the Board may in its absolute discretion determine." Chatila reportedly supports the proposal.

It has not yet decided in what way the capital will be returned to shareholders but DCC envisages that this may be through dividends, share buybacks, tender offers, capital reductions, a liquidation of the company or a combination thereof.

A liquidator officer will not be initially appointed.

While the portfolio liquidation is carried out, DCC expects that the shares will continue to be trading on the London Stock Exchange until the company no longer meets the listing requirements.