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Canada's CPPIB pension fund may bid for Dominion Diamond: sources
May 11, 2017 / 3:01 PM / in 5 months

Canada's CPPIB pension fund may bid for Dominion Diamond: sources

TORONTO/VANCOUVER (Reuters) - The Canada Pension Plan Investment Board (CPPIB)), the country’s biggest public pension fund, is considering a bid for Dominion Diamond Corp (DDC.TO)(DDC.N) and is studying the miner’s books, people familiar with the process told Reuters. 

The move comes after Dominion, the world’s third largest diamond producer by market value, put itself up for sale in late March, following an unsolicited $1.1 billion approach from U.S. billionaire Dennis Washington.

Shares of Dominion Diamond rose as much as 6.1 percent in Toronto trading and as much as 8.1 percent in New York.

CPPIB, with assets of C$298 billion ($217 billion) under management, and Dominion both declined to comment.

The sources, whom Reuters spoke to over a period of several days, declined to be named as the talks are confidential.

It is unlikely that CPPIB will make an offer for Dominion on its own, and if CPPIB decides to proceed with a bid, it may financially back a partner with mine operation expertise, the sources said.

CPPIB is one of more than five parties that have signed an agreement with Dominion to get access to its confidential data, one source said.

Canadian small producer Stornoway Diamond Corp (SWY.TO) held merger talks with Dominion earlier this year, Reuters reported, but it is unclear if it will make a formal bid. Stornoway declined to comment.

Stornoway declined to comment.

There is no certainty that CPPIB, which manages Canada’s national pension fund and invests on behalf of 20 million Canadians, will submit a bid, said the sources.

The pension fund also looked at Dominion’s books in 2015, two sources said, when the company worked with investment bank Rothschild & Co to find ways to boost shareholder value, including a potential sale.

Completing due diligence on Dominion, which owns a majority stake in the Ekati mine and a minority share of the Diavik mine, both in Canada’s Northwest Territories, will likely take four to six weeks, one source said.

Interested parties, including Washington, signed confidentiality agreements to get access to company data, Dominion said on May 1. It said there was no timetable for its review of strategic alternatives.

Washington, whose privately held company has interests in mining, marine and rail transportation and heavy equipment distribution, was not immediately available for comment.

Dominion has already rebuffed a $13.50 a share takeover proposal from Montana-based Washington that it called an “opportunistic” bid that undervalued the company.

Dominion, which hired Toronto-Dominion Bank (TD.TO) to run the sales process, holds its annual meeting in Toronto on June 13.

There has been ongoing market speculation that offers may come from global miners Rio Tinto (RIO.L)(RIO.AX) and Anglo American’s (AAL.L) De Beers unit.

Rio and Anglo declined to comment on Thursday.

Rio holds a 60 percent stake and operates in Diavik, while De Beers operates the Gahcho Kue diamond mine in the same territory with Mountain Province Diamonds Inc (MPVD.TO).

Rio is not expected to move quickly on Dominion, two sources said, and will likely decide its strategy after other companies have announced their plans.

Additional reporting by John Tilak and Matt Scuffham in Toronto, and Barbara Lewis in London; Editing by Denny Thomas and Jeffrey Benkoe

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