US$1.2 Billion Acquisition Represents 44%
Premium to Dominion’s Unaffected Share Price
Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the
“Company” or “Dominion”) and The Washington Companies
(“Washington”), a group of privately held North American mining,
industrial and transportation businesses founded by industrialist
and entrepreneur Dennis R. Washington, today announced that they
have entered into an arrangement agreement (the “Arrangement
Agreement”) under which an entity affiliated with Washington will
acquire all of Dominion’s outstanding common shares for US$14.25
per share in cash or a total equity value of approximately US$1.2
billion pursuant to a plan of arrangement (the “Arrangement”) under
the Canada Business Corporations Act. The transaction represents a
44 percent premium to Dominion’s unaffected share price of US$9.92
on March 17, 2017. The transaction marks the result of Dominion's
review of strategic alternatives as previously announced on March
27, 2017.
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The Board of Directors of Dominion (the “Board”), after
consultation with financial and legal advisors, and based on the
recommendation of a special committee of the Board consisting of
four independent directors, has unanimously determined that the
Arrangement is in the best interests of the Company, approved the
Arrangement and recommends that Dominion’s shareholders vote in
favour of the Arrangement. All directors of the Company have
entered into support agreements to vote their common shares in
support of the Arrangement.
“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 favour 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
favourably 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.”
Benefits to Canada
Washington will be a responsible, long-term operator and builder
of Dominion’s world-class assets, and plans to extend the mine life
of Ekati for decades, consistent with the current development
plan.
As part of this 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;
- Honour 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 US$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 US$150 million if closing is on or
before November 30, 2017, or US$200 million if closing is after
November 30, 2017, 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.
To fund part of the consideration payable in connection with the
Arrangement, Washington has obtained fully committed debt financing
led by Credit Suisse with Citi, UBS Investment Bank and Natixis
acting as joint lead arrangers. The balance of the consideration
will be funded with an equity commitment from Washington and cash
on Dominion’s balance sheet.
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
US$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.
Further information regarding the transaction will be included
in the Company’s management information circular to be mailed to
Dominion’s shareholders in advance of the special meeting of
Dominion shareholders, which is expected to be held in September
2017, and in Dominion’s material change report in respect of the
announcement of the transaction, each of which will be filed with
the Canadian and U.S. securities regulators and will be available
on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
The Board has obtained a fairness opinion from each of TD
Securities Inc. and Morgan Stanley Canada Limited that, as of the
date of the opinions, and subject to the assumptions, limitations
and qualifications on which such opinions are based, the
consideration to be received by the Company’s shareholders pursuant
to the Arrangement Agreement is fair, from a financial point of
view, to the Company’s shareholders.
Financial and Legal Advisors
BDT & Company, LLC is providing financial advice to
Washington. Blake, Cassels & Graydon LLP and Skadden, Arps,
Slate, Meagher & Flom LLP are acting as legal counsel to
Washington.
TD Securities Inc. is acting as financial advisor to the
Company, Stikeman Elliott LLP is acting as legal advisor to the
Company and Kingsdale Advisors is acting as strategic advisor to
the Company.
Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as
legal advisor to the Special Committee and the Board of Directors
of the Company. Morgan Stanley Canada Limited is acting as
financial advisor to the Special Committee of the Board, and has
provided a fairness opinion to the Board on a fixed fee basis.
Forward-Looking StatementsThis news release includes
forward-looking statements and information (collectively, the
“forward-looking statements”) including, but not limited to:
forward-looking statements pertaining to the purchase by Washington
of all the issued and outstanding common shares of Dominion; the
expected benefits of the transaction, including the expected
benefits to shareholders, customers, employees and other
stakeholders as well as future financial and operating results; the
anticipated timing for the special meeting of Dominion shareholders
and closing of the transaction; the satisfaction of closing
conditions including, without limitation (i) certain regulatory
approvals; (ii) required Dominion shareholder approval; (iii)
necessary court approval in connection with the plan of
arrangement, (iv) certain termination rights available to the
parties under the Arrangement Agreement; and (v) other closing
conditions, including, without limitation, the operation and
performance of the Dominion business in the ordinary course until
closing of the transaction, maintenance by Dominion of a minimum
cash balance in the amounts as specified in the Arrangement
Agreement, and compliance by Dominion with various covenants
contained in the Arrangement Agreement, all of which are subject to
risks, uncertainties and assumptions. As a consequence, actual
results in the future may differ materially from any expectation,
conclusion, forecast or projection in such forward-looking
statements. Therefore, forward-looking statements should be
considered carefully and undue reliance should not be placed on
them. Examples of statements that constitute forward-looking
information may be identified by words such as “believe”, “expect”,
“project”, “should”, “anticipate”, “could”, “target”, “forecast”,
“intend”, “plan”, “outlook”, “see”, “set”, “pending”, and other
similar terms. All forward-looking statements are made pursuant to
the safe harbour provisions of applicable Canadian securities
legislation. Forward-looking statements are subject to risks,
uncertainties and assumptions including, but not limited to: the
potential risk that the transaction will not be approved by
Dominion shareholders; failure to, in a timely manner, or at all,
obtain the necessary regulatory and court approvals for the
transaction or any transaction ancillary thereto; failure of the
parties to otherwise satisfy the conditions to complete the
transaction; the possibility that the Board of Directors of
Dominion could receive an acquisition proposal and approve a
superior proposal; the effect of the announcement of the
transaction on Dominion’s strategic relationships, operating
results and business generally; significant transaction costs or
unknown liabilities; the risk of litigation that would prevent or
hinder the completion of the transaction; and other customary risks
associated with transactions of this nature. In addition, if the
transaction is not completed, and Dominion continues as an
independent entity, there are risks that the announcement of the
transaction and the dedication of substantial resources of Dominion
to the completion of the transaction could have an adverse impact
on Dominion’s business and strategic relationships, operating
results and business generally. As a consequence, actual results in
the future may differ materially from any forward-looking
statement, forecast or projection, whether expressed or implied.
Therefore, forward-looking statements should be considered
carefully and undue reliance should not be placed on them. Please
note that forward-looking statements in this news release reflect
Management’s expectations as of the date hereof, and thus are
subject to change thereafter. The Company disclaims any intention
or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law. Factors that could cause anticipated
opportunities and actual results to differ materially include, but
are not limited to, matters referred to above and those matters
identified in the Risks and Uncertainties section and elsewhere in
the Company's most recent annual MD&A and the material change
report that will be filed in respect of this transaction, which
are, or will be, available on the Company's website at
www.ddcorp.ca and on SEDAR at www.sedar.com and EDGAR at
www.sec.gov.
About Dominion Diamond CorporationDominion Diamond
Corporation is a Canadian mining company and one of the world’s
largest producers and suppliers of premium rough diamond
assortments to the global market. The Company operates the Ekati
Diamond Mine, in which it owns a controlling interest, and owns 40%
of the Diavik Diamond Mine, both of which are located in the low
political risk environment of the Northwest Territories in Canada.
It also has world-class sorting and selling operations in Canada,
Belgium and India.
About The Washington CompaniesThe Washington Companies,
founded by industrialist and entrepreneur Dennis R. Washington, are
privately held companies active in the core industries of mining,
rail and marine transportation, aviation, environmental remediation
and restoration services, and heavy equipment sales and service.
The companies are headquartered throughout Montana, the Pacific
Northwest and western Canada and conduct business
internationally.
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version on businesswire.com: http://www.businesswire.com/news/home/20170717005343/en/
For more information, please visit
www.ddcorp.ca, or contact:Investors:Dominion
Diamond CorporationJacqueline Allison, 416-205-4371Vice
President, Investor Relationsjacqueline.allison@ddcorp.caorCanadian
Media:DFH Public AffairsIan Hamilton, 416-206-0118 x222orUS
Media:Gagnier CommunicationsDan Gagnier, 646-569-5897orThe
Washington CompaniesSard Verbinnen & CoAnna Cordasco /
Jared Levy / Patrick Scanlan, 212-687-8080
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