Rockwell mulls expansion possibilities after Pala truce
2009-02-03 14:13 ET - Street Wire
by Will Purcell
After successfully beating back a hostile takeover bid, Rockwell Diamonds Inc. could be planning to make an acquisition or two of its own. The company's head, Dr. John Bristow, said Rockwell "still had a lot of its own stuff to grow," but he added he would be looking at opportunities to cherry pick worthy projects over the coming year. The bid by Vladimir Iorich's Pala Investments Holdings Ltd. to acquire Rockwell failed late last year, but the battle cost both parties a significant amount of cash. As a result, any expansionary move by Rockwell will be by mutual consent.
The Pala truce
Pala Investments formally launched its bid for Rockwell in September when it offered to pay 36 cents for each of Rockwell's nearly 240 million shares. At the time, Rockwell's stock was trading for 20 cents per share, allowing Pala to claim the offer was a generous one. Meanwhile, Dr. Bristow's backers called the bid opportunistic, noting the company's shares sold for an average of about 60 cents per share over the preceding two years.
The opportunistic, yet generous bid came to an end in early November. Officially, Pala said it was backing off because a number of conditions to the offer were not satisfied, but unofficially, it likely decided the offer was too generous in light of the worsening market meltdown. Within a few weeks of withdrawing the offer, a Rockwell share cost just 2.5 cents.
Dr. Bristow now has at least an uneasy truce with Pala, which first started buying Rockwell's shares two years ago. In late November, Rockwell replaced four of its existing seven directors, but the changes will not significantly alter control of the company. Two of the replacements are independent geologists with a diamond background, and the third move added a shareholder of Rockwell's black empowerment partner. (Companies operating in South Africa have to sell a portion of their projects to a local company run by blacks.)
The final change, the addition of Greg Radke to the board, gives Pala Investments its first voice in running the company, but he is unlikely to have a major impact on Rockwell's plans. Having withdrawn its bid for Rockwell, regulations prohibit Pala from trying again for at least 12 months. Further, Dr. Bristow is optimistic that having Pala sitting at the boardroom table will be preferable to having a grumpy Mr. Iorich on the outside, plotting his next move.
He is also hopeful that Mr. Radke will learn firsthand the problems Rockwell faces in operating in South Africa. Pala criticized Rockwell's management for delays over the past year or two at Saxendrift and the company's other alluvial mines, but Dr. Bristow said the problems were invariably bureaucratic in nature.
The plan
Dr. Bristow said he expects the diamond sector will be busy with junior companies restructuring their operations and he would prefer Rockwell "to be the consolidator, not the consolidatee" in any new merger deals. Rockwell's legal fees jumped by about $500,000 in the third quarter and any acquisitions by Dr. Bristow and his company are certain to be far friendlier than the Pala bid.
Dr. Bristow said he expected any new acquisition by Rockwell would result from like-minded people putting aside their egos and getting together for the good of their companies, without either side giving away too much. Rockwell, which has the backing of another significant shareholder, the private Hunter Dickinson Group, has a history of making acquisitions. Rockwell's last big deal occurred late in 2007 when it acquired Durnpike Investment Ltd., which owned the Holpan, Klipdam and Wouterspan diamond mines. Earlier that year, it bought the Saxendrift mine from Trans Hex Group Ltd.
Rockwell closed down one-half cent to six cents Friday on 89,000 shares and did not trade Monday.
|
