Globe Article on DiaMet sale BHP buys Dia Met for $687-million
By TERRY WEBER Globe and Mail Update Australia's BHP Ltd. said Monday it will buy Dia Met Minerals Ltd. — Canada's first diamond producer — for $687-million, marking the latest push by a foreign firm into the country's north. Vancouver-based Dia Met had been the subject of much speculation after its decision last October to put itself up for sale. Diamond giant De Beers Consolidated Mines Ltd. quickly denied rumors late last fall that it had approached Marlene Fipke, the former wife of Dia Met founder Charles Fipke to sell her 26-per-cent stake in Dia Met. Dia Met's key holding is its 29-per-cent stake in the Ekati diamond mine, which BHP Diamonds Inc. also operates. Under the terms of Monday's deal, BHP has offered $21 cash for each Dia Met Class A subordinated voting and Class B multiple voting share. Dia Met's board has approved the offer and will recommend that the company's shareholders tender to the bid. The Vancouver company has also agreed to pay a $20-million break-up fee if the deal falls through. It has also agreed not to look for any other buyers. The company's two largest shareholders Ms. Fipke and director David Mackenzie — who collectively control about 20 per cent of the Class A shares and 39 per cent of Class B shares — have also entered into lock-up agreements to tender their stakes under the offer. BHP's offer represents a 23.2-per-cent and 15.1-per-cent premium on the Class A and Class B shares on Oct. 16, the day Dia Met announced it would seek a buyer. "Dia Met's board of directors initiated the auction process in October 2000, after the company's two largest shareholders indicated a desire to sell their shares," said Dia Met Chairman Peter Atkinson. "These shareholders entered into an agreement with the company not to sell their shares privately and to allow the board of directors to supervise a process that would solicit an offer for all outstanding Dia Met shares. It was the objective of the board to ensure that all shareholders would have the same opportunity to sell their shares, if a serious bid emerged." At the time the company was put up for sale, it said it had been advised by Ms. Fipke and Mr. Mackenzie that they are ready to sell their stock. Ms. Fipke acquired a 26-per-cent stake in the company after a high-profile divorce settlement with Mr. Fipke. Her stake in Vancouver-based Dia Met is worth about $177-million. Mr. Mackenzie, a former bush pilot who lives quietly in Victoria, owned about a 12-per-cent stake in Dia Met as of last October. Dia Met's key asset is its 29-per-cent stake in the Ekati diamond mine, a Northwest Territories operation that is currently producing about three million carats annually or 5 per cent of global diamond production. The other partners are BHP Diamonds Inc., BHP's Canadian affiliate, which has 51 per cent and the right to market the diamonds until May, 2003. Mr. Fipke and his former Ekati partner Stu Blusson each own 10 per cent. "The Ekati diamond mine is a world class asset and BHP has previously indicated its intention to expand its presence in the diamond industry," Ron McNeilly, president of BHP Minerals, said. "The industry is presently undergoing a period of consolidation and, by increasing our ownership in Ekati, BHP has the opportunity to extract maximum value from this asset." The purchase of the extra 29-per-cent stake in the Ekati joint venture, BHP said, is strategically important for the Australian company, as it plans new marketing initiatives for diamonds produced by the mine. "Given the success of Ekati diamonds in the marketplace and BHP's own marketing efforts, a consolidation of ownership of this asset is considered an excellent outcome," the company said. Although the offer is subject to some regulatory approvals, BHP also said those are "expected to be forthcoming."