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Gemfields PLC GEM Proposed Acquisition of Fabergé



  Gemfields PLC (GEM) - Proposed Acquisition of Fabergé

RNS Number : 6552R
Gemfields PLC
21 November 2012
 



                                       

21 November 2012 7:00 a.m.

                                       

THE INFORMATION CONTAINED  HEREIN IS  RESTRICTED AND IS  NOT FOR  PUBLICATION, 
RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES,
CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF  SOUTH AFRICA OR NEW ZEALAND OR  ANY 
JURISDICTION IN  WHICH  SUCH  PUBLICATION RELEASE  OR  DISTRIBUTION  WOULD  BE 
UNLAWFUL.

                                       

                                Gemfields plc

                                       

                        ("Gemfields" or the "Company")

                                       

                       Proposed Acquisition of Fabergé

 

 

Gemfields plc (AIM: GEM), the  leading gemstone mining and marketing  company, 
announces its  proposed acquisition  (the "Proposed  Acquisition") of  a  100% 
interest in Fabergé  Limited ("Fabergé") with  a view to  creating a  globally 
recognised coloured gemstone  champion.  Fabergé will  provide Gemfields  with 
direct control over a high-end luxury  goods platform and a global brand  with 
an exceptional heritage.

The Proposed Acquisition consideration will be satisfied by the issue of up to
214 million  new  Ordinary  Shares representing  approximately  39.6%  of  the 
Enlarged Issued Share  Capital (assuming no  shareholder in Fabergé  dissents) 
following Completion. It values Fabergé  at approximately US$142 million  (£89 
million), on  the basis  of a  30 day  volume weighted  share price  as at  20 
November 2012 and at approximately US$133 million (£83 million), on the  basis 
of the price of Ordinary Shares as at 20 November 2012.

The Proposed Acquisition  is conditional  on, inter  alia, (i)  the waiver  by 
Independent  Shareholders  of  Pallinghurst  Group's  obligation  to  make   a 
mandatory offer under Rule 9  of the City Code on  Takeovers and Mergers as  a 
result of the Proposed  Acquisition, (ii) the  restructuring of the  Company's 
largest shareholder, Rox,  (iii) the  approval of the  acquisition of  Fabergé 
shares from  persons  connected with  a  director  of the  Company,  and  (iv) 
admission of the Consideration Shares to trading on AIM. It is expected that a
shareholder circular will be posted in due course and the relevant resolutions
will be proposed at the Company's AGM to be held in December 2012.

 

Proposed Acquisition highlights:

 

•     Positions Gemfields as a UK based leading coloured gemstone miner and  a 
global iconic luxury brand with an  exceptional heritage operating in the  two 
most profitable segments within the gemstone supply chain

 

•     Proposed  Acquisition  further  advances Gemfields'  "Mine  and  Market" 
strategy creating a coloured gemstone champion

 

•     Positions Fabergé as  the coloured gemstone  retailer of choice,  within 
the hard luxury retail  sector; a sector with  an estimated turnover of  US$54 
billion in 2011 according to the Bain Luxury Market Study

 

•     Marketing,  communication, management  and supply  synergies to  deliver 
operational efficiencies within the Enlarged Group

 

•     Consolidates  Gemfields'  brand  as  "The  Coloured  Gemstone  Company", 
creating a platform to further increase the Company's market share within  the 
coloured gemstone sector,  while gaining exposure  to luxury sector  multiples 
and greater influence over product positioning and consumer awareness

 

•     Gemfields will continue to  sell its rough coloured gemstone  production 
through its established auction platform

 

•     The Enlarged  Group, listed on  AIM and managed  from London, will  have 
approximately 1,150  employees  across  the  United  Kingdom,  United  States, 
Switzerland, Zambia,  Mozambique,  India  and  China  providing  expertise  in 
coloured gemstones  via a  global platform  poised for  additional growth  and 
expansion at both ends of the supply chain

 

•     The Enlarged Group has a management team with the experience and ability
to deliver success and has instigated  a detailed integration plan which  will 
begin immediately following Completion

 

•     Provides  a strong  platform  for the  Company's  intended move  to  the 
premium listing segment of the UKLA's Official List and to trading on the Main
Market of the London Stock Exchange^1

 

•     The  Unbundling of  Rox, Gemfields'  largest shareholder  (59.1%, or  if 
including Pallinghurst's  direct holdings,  63.0%), into  its component  parts 
will increase the number of independent  shareholders in the Company and  will 
leave the Pallinghurst Group with a 49.3% shareholding^2.

 

^1^ Subject to eligibility and confirmation from the appropriate authorities

^2 Immediately following Completion the  Concert Party will make a  submission 
to the Panel to be regarded as independent

 

Fabergé overview:

 

•     Fabergé is  a purveyor  of luxury  jewellery with  boutiques and  retail 
concessions located in  Geneva, New York,  London (in Mayfair  and Harrods  in 
Knightsbridge), and Hong Kong

 

•     Like Gemfields, Fabergé is set for growth, with revenues growing 367% in
the financial year to 31  March 2012. In the financial  year to 30 June  2012, 
Gemfields' revenues were up 108% to US$83.7 million with profit before tax and
exceptional items up 140% to US$47.8 million

 

•     Assuming Completion  in early Q1  2013, Fabergé is  expected to have  at 
least US$10 million in cash and no debt at Completion

 

Ian Harebottle,  CEO  of  Gemfields plc,  commented:   "Gemfields  has  firmly 
established itself as "the Coloured Gemstone Mining Company" and the  proposed 
acquisition of Fabergé further enhances our potential to be recognised as  the 
leading coloured  gemstone  company. It  provides  exposure to  the  two  most 
profitable segments in the gemstones  value chain, namely mining and  consumer 
sales. Fabergé  is a  globally  recognised brand  with  a unique  heritage,  a 
history of excellence and  a commitment to  coloured gemstone products,  sales 
and marketing,  all of  which  is perfectly  demonstrated by  the  magnificent 
Romanov necklace crafted from 2,225 emeralds and diamonds and unveiled earlier
this year. The proposed acquisition  is transformational for the Company,  our 
team and our shareholders and has the potential to deliver significant  value, 
expanded growth  and  diversification opportunities  to  the Company  and  our 
shareholders.

 

Gemfields has  made excellent  strides in  its coloured  gemstones mining  and 
marketing initiatives, which will remain core to our business. However, we are
confident that we will be able to  put the new and exciting opportunities  and 
natural synergies, that a globally  recognised brand of Fabergé's standing  is 
able to offer  us, to  good use. I  have no  doubt that Fabergé  will help  to 
further accelerate demand  for Gemfields' ethically  sourced premium  coloured 
gemstones, actively championing the coloured gemstone industry and providing a
directly-controlled showcase for our  finest gems. We  look forward to  moving 
into what is a  considerably larger and grander  market space than that  which 
was previously available to the Gemfields brand."

 

 

Katharina Flohr, Managing  and Creative Director  at Fabergé, commented:  "The 
combination with  Gemfields  presents a  unique  platform to  further  develop 
coloured gemstone products in new and existing global markets. Both businesses
are fortunate to share the same vision and to recognise the exciting long term
opportunity that exists within  the combination of  the coloured gemstone  and 
luxury goods markets. Gemfields' leading market position is in part due to its
ability to supply ethically produced coloured  gemstones on a large scale  but 
is also due to its extensive marketing initiatives, both of which are  certain 
to be developed further by Fabergé, to  the benefit of both companies and  the 
sector as a whole."

 

Canaccord is acting as Nominated Adviser and Financial Adviser and J.P. Morgan
Cazenove is acting as  Financial Adviser to Gemfields  in connection with  the 
Proposed Acquisition.

 

Further details of the Proposed Acquisition are set out in Appendix I to  this 
announcement  and  defined  terms  are  set   out  in  Appendix  II  to   this 
announcement.

 

Analyst presentation and webcast

 

A conference  call and  webcast  presentation will  be  held on  Wednesday  21 
November 2012  at 09:00  GMT. Participants  may join  the conference  call  by 
dialling one of the following numbers and logging onto the anywhere conference
facility to access the presentation approximately 10 minutes before the  start 
of the call:

 

From UK (toll free): 0800 368 1950

 

From South Africa (toll free): 0800 983 097

 

From the rest of the world: +44 (0)20 3140 0668

 

Participant PIN code: 144144#

 

Web details:

 

Click on link: https://www.anywhereconference.com/

 

Web login: 113388329

 

Participant PIN code: 144144

 

A recording of this will  be available from 14:00 GMT  on 21 November 2012  on 
the Company's website: www.gemfields.co.uk.

 

 

Enquiries:

Gemfields                                                                     +44 (0)20 7518 3402
Ian Harebottle, CEO
Dev                            Shetty,                             COO dev.shetty@gemfields.co.uk
                                                       
                                                                      
Canaccord Genuity Limited                                                     +44 (0)20 7523 8000
Nominated Adviser, Joint Broker and Financial Adviser to Gemfields
Tarica   Mpinga/Andrew    Chubb                                        
           
J.P. Morgan Cazenove                                                          +44 (0)20 7742 4000
Joint Broker and Financial Adviser to Gemfields

Neil  Passmore/Jamie  Riddell                                          
                                  
Tavistock Communications                                                      +44 (0)20 7920 3150
Jos Simson/Emily Fenton/Jessica
Fontaine                                
                                                                 

 

Forward-Looking Statements

This announcement contains  'forward-looking statements' concerning  Gemfields 
and Fabergé that are subject to risks and uncertainties. Generally, the  words 
'will',  'may',   'should',   'continue',  'believes',   'targets',   'plans', 
'expects',  'aims',  'intends',  'anticipates'   or  similar  expressions   or 
negatives  thereof  identify   forward-looking  statements.  Forward   looking 
statements include statements  relating to the  following: (i) future  capital 
expenditures, expenses, revenues,  earnings, synergies, economic  performance, 
indebtedness,  financial  condition,  dividend   policy,  losses  and   future 
prospects; (ii)  business  and management  strategies  and the  expansion  and 
growth of Gemfields' or Fabergé's operations and potential synergies resulting
from the Proposed Acquisition; and (iii) the effects of government  regulation 
on Gemfields' or Fabergé's business.

These forward-looking statements  involve risks and  uncertainties that  could 
cause actual  results  to  differ  materially  from  those  expressed  in  the 
forward-looking statements. Many  of these risks  and uncertainties relate  to 
factors that are beyond Gemfields' or Fabergé's ability to control or estimate
precisely, such as future market conditions, changes in regulatory environment
and the behaviour of other market participants. Neither Gemfields nor  Fabergé 
can give any assurance that such forward-looking statements will prove to have
been correct. The  reader is cautioned  not to place  undue reliance on  these 
forward-looking  statements,  which  speak  only  as  of  the  date  of   this 
announcement. Neither  Gemfields  nor  Fabergé undertakes  any  obligation  to 
update or  revise  publicly any  of  the forward-looking  statements  set  out 
herein, whether as a  result of new information,  future events or  otherwise, 
except to the extent legally required.

Nothing contained  herein shall  be deemed  to be  a forecast,  projection  or 
estimate of  the future  financial performance  of Gemfields,  Fabergé or  any 
other person  following  the implementation  of  the Proposed  Acquisition  or 
otherwise. 

Canaccord, which is  authorised and  regulated in  the United  Kingdom by  the 
Financial Services Authority, is acting as nominated adviser, joint broker and
financial adviser  to the  Company  and no-one  else  in connection  with  the 
arrangements referred to herein  and will not be  responsible to anyone  other 
than the Company  for providing  the protections  afforded to  the clients  of 
Canaccord or  for  affording  advice  in relation  to  the  contents  of  this 
announcement or any matters referred  to herein. Canaccord has not  authorised 
the contents  of,  or  any part  of,  this  announcement, is  not  making  any 
representation or warranty,  express or implied,  as to the  contents of  this 
announcement and nor shall it have any liability whatsoever (in negligence  or 
otherwise) for any loss whatsoever arising from any use of this  announcement, 
its contents  or  otherwise  arising  in  connection  with  this  announcement 
(including any omission of any information from this announcement). Nothing in
this paragraph  shall serve  to exclude  or limit  any responsibilities  which 
Canaccord may have under FSMA or the regulatory regime established thereunder.

J.P. Morgan Cazenove, which is authorised and regulated in the United  Kingdom 
by the Financial Services Authority, is  acting as joint broker and  financial 
adviser to the  Company and no-one  else in connection  with the  arrangements 
referred to  herein and  will not  be  responsible to  anyone other  than  the 
Company for providing the protections afforded  to the clients of J.P.  Morgan 
Cazenove, nor will J.P. Morgan Cazenove be responsible to anyone for affording
advice in  relation  to the  contents  of  this announcement  or  any  matters 
referred to herein. J.P. Morgan Cazenove  has not authorised the contents  of, 
or any  part  of, this  announcement,  is  not making  any  representation  or 
warranty, express or implied, as to the contents of this announcement and  nor 
shall it have any  liability whatsoever (in negligence  or otherwise) for  any 
loss whatsoever arising  from any use  of this announcement,  its contents  or 
otherwise arising in connection with this announcement (including any omission
of any information from  this announcement). Nothing  in this paragraph  shall 
serve to exclude or limit any responsibilities which J.P. Morgan Cazenove  may 
have under FSMA or the regulatory regime established thereunder.

If the anticipated timetable materially  changes, the Company will provide  an 
update via RIS.  

 

                                  APPENDIX I

Introduction

 

The Board is pleased to announce that Gemfields has entered into a conditional
Implementation Agreement which sets out the framework for it, through a Cayman
subsidiary, to acquire 100% of  the issued and to  be issued share capital  of 
Fabergé by way of  merger in the Cayman  Islands. Fabergé is an  international 
purveyor of luxury jewellery with boutiques and concessions located in Geneva,
New York, London (in Mayfair and Harrods in Knightsbridge) and Hong Kong.

 

The Directors believe that the Proposed Acquisition will accelerate Gemfields'
development  and  momentum  within  the  coloured  gemstone  sector,   further 
enhancing the Company's position as a coloured gemstone champion. The Proposed
Acquisition positions Fabergé as the "go-to" jeweller for coloured gemstones -
thereby filling a perceived gap in the market - and effectively allowing it to
become the  coloured gemstone  jeweller  of choice  in consumers'  minds.  The 
Directors believe that  the coloured  gemstones sector has,  in recent  years, 
been largely overlooked by the large-scale mining producers and higher-quality
retailers at least partly as a result of the current overwhelming focus on the
diamond market. This has in turn led to an undercapitalisation of the coloured
gemstone industry which has also suffered from the challenges of  inconsistent 
and fragmented supply  and limited  marketing spend.  The  Directors see  this 
historic underinvestment as  an opportunity to  target dynamic growth  through 
consolidation and vertical  integration, and believe  that the Enlarged  Group 
will enjoy a superior ability to grow and promote the coloured gemstone sector
in terms  of both  volume and  value sales  as the  sector gains  in size  and 
influence.

 

Gemfields views the Proposed Acquisition as an important strategic opportunity
to boost the international presence  and perception of coloured gemstones,  to 
gain participation in the high margin luxury sector and to further advance its
stated "mine and  market" vision.  The transaction  should broaden  Gemfields' 
investor and  institutional appeal  beyond the  traditional mining  investment 
community, potentially gaining exposure to luxury sector multiples.

 

Acquisition Overview

 

The consideration for the Proposed Acquisition comprises entirely of the issue
and allotment  of  up to  214  million new  Ordinary  Shares (subject  to  any 
dissenting rights). The Consideration Shares  will be allocated among  Fabergé 
Shareholders in proportion to their shareholding in Fabergé immediately  prior 
to Completion.

 

The Proposed Acquisition is conditional  upon, inter alia, the Whitewash,  the 
Unbundling, the Section 190 Approval and Admission.

 

The resolutions  necessary  to  implement the  Proposed  Transaction  will  be 
proposed at the Company's Annual General Meeting to be held in December 2012.

 

It is expected  that the Proposed  Acquisition will be  completed in early  Q1 
2013.

 

About Gemfields

 

Gemfields is a  leading gemstone mining  and marketing company  listed on  AIM 
(ticker: GEM). The Company's  principal asset is the  75% owned Kagem  emerald 
mine in Zambia, the world's single largest producing emerald mine by value and
volume. In  addition to  this, Gemfields  has  a 50%  interest in  the  Kariba 
amethyst mine in Zambia and  a 75% interest in  the Montepuez ruby deposit  in 
Mozambique, which is currently undergoing trial mining and bulk sampling, with
the first sales of goods expected to  take place in H1 2013. The Company  also 
owns licences in Madagascar including ruby, emerald and sapphire deposits.   

 

In July 2009, Gemfields commenced a formal auction programme for its ethically
sourced Zambian emeralds. To date, the Company has held 11 auctions which have
generated combined revenues totalling US$160.5 million.

 

On 2 October 2012,  Gemfields announced a significant  upgrade in its  mineral 
resource at the Kagem mine to a JORC Code compliant Indicated Mineral Resource
of 1.0 billion carats  of emerald and beryl  at a projected 365  carats/tonne, 
while at the same time completing an underground mining feasibility study  and 
anticipating a 20 year mine life at a production rate of 34 million carats per
annum, development of which is expected  to commence in the financial year  to 
30 June  2014.  This announcement  was  followed  by record  results  for  the 
financial year to 30  June 2012 with  revenue up 108%  to US$83.7 million  and 
profit before tax and exceptional items up 140% to US$47.8 million.   

 

About Fabergé

 

The Fabergé brand was originally established  by Gustav Fabergé in 1842 in  St 
Petersburg, Russia. It was Gustav's son, Peter Carl Fabergé (born in 1846) who
led the firm to worldwide renown,  winning the favour of the Imperial  Romanov 
family in the 1880s and the award of the Grand Prix at the 1900 World Fair  in 
Paris.  Fabergé is a world-renowned luxury name in part due to the success  of 
the 50 jeweled  eggs commissioned  by the  Imperial Russian  family from  1885 
through to 1916.

 

Today, Fabergé's catalogues of  luxury items and  objets d'art are  intimately 
associated with the use of colour and of coloured gemstones.

 

The Fabergé brand  underwent two dramatic  setbacks in the  first half of  the 
20th century. The first was the Bolshevik Revolution of 1918 which resulted in
the scattering of the Fabergé  family and a violent  end to production at  the 
Fabergé workshops.  As a  result,  the Fabergé  family was  not  significantly 
involved in the production of Fabergé-branded items for almost 90 years.

 

Secondly, in 1951 the Fabergé family effectively lost the rights to use  their 
family name in marketing Fabergé-branded designs when protracted and expensive
litigation  forced  a  settlement  that  ceded  the  rights  to  an   American 
corporation in return for only US$25,000.

 

After changing hands on two further occasions, the then Fabergé Inc (which had
acquired Elizabeth Arden) was purchased by Unilever plc for US$1.55 billion in
1989.

 

In January 2007, Pallinghurst acquired from Unilever plc a worldwide portfolio
of Fabergé trademarks, licences  and associated rights  and reunited the  name 
with the  Fabergé family  through the  establishment of  the Fabergé  Heritage 
Council.  Following an extensive two-and-a-half  year clean-up of the  brand's 
business,  licences  and   trademarks,  the  unified   Fabergé  was   formally 
re-launched on 9  September 2009,  with the  first new  collection since  1917 
unveiled at Goodwood  House, England.  Fabergé has since  opened boutiques  or 
concessions in Geneva, London (in Mayfair and Harrods in Knightsbridge),  Hong 
Kong and New York.

 

Fabergé has opened  five new  retail outlets since  2009, four  of which  were 
opened in the last two years. Fabergé delivered revenue of US$6.97 million  in 
the financial year to 31 March 2012, an increase of 367% on the previous year.

 

Fabergé is targeting opening an average of  two new stores per annum over  the 
next ten years, with an aim of 71 stores by 2033. Fabergé is targeting  US$6.5 
million of annual  sales in the  medium term  for each new  store added.  Each 
store is expected  to have  operating costs of  circa US$1  million per  annum 
comprising of fixed costs of US$750,000 and sustaining capital expenditure  of 
US$30,000. Fabergé is also targeting a 26/74% wholesale/retail sales mix.

 

Summary financials

 

Summary financials for Fabergé are set out below:

 

(US$ '000)                   Mar-2009A Mar-2010A Mar-2011A Mar-2012A Sep 2012A
Income Statement
Revenue                          4,481       765     1,492     6,966     2,556
Cost of sales                        -      -354    -1,590    -5,109    -1,501
Sales, general and             -17,680   -20,929   -13,695   -15,442    -7,871
administrative costs
Corporation tax                    -16       -20       -42       -17        -2
Net loss                       -13,165   -20,584   -14,618   -14,308    -7,299
Balance sheet
Intangible assets               36,172    36,275    36,266    36,261    36,263
Tangible fixed assets              115       898       728     1,121     1,906
Inventory                       15,499    22,038    24,230    29,664    34,282
Loan from Shareholders^1             -         -    -6,450   -25,705   -51,677
Employee loan/(benefits)        -1,259    -1,941    -1,211    -1,206    -1,229
Net assets                      56,450    71,178    56,560    42,252    35,235
Retained loss                  -23,426   -43,906   -57,991   -72,450   -79,749
Cash Flow Statement
Changes in working capital     -16,875    -5,758    -3,425    -3,550    -1,526
Operating cash flow            -26,012   -25,960   -18,127   -16,490    -7,201
Investing cash flow             -1,827    -1,099      -150    -1,487    -1,277
Financing cash flow             27,729    35,370     6,200    18,347    25,136
Net cash flow                     -110     8,311   -12,077      -371    16,658
Cash at the end of the year      5,461    13,772     1,695     2,066    18,884

 

 ^1 It is expected that the current shareholder loans of circa US$52m will  be 
converted into equity immediately prior to Completion.

 

Background to and reasons for the Proposed Acquisition

 

The principal  benefits  of the  Proposed  Acquisition for  Gemfields  are  as 
follows:

 

Route to market

 

Gemfields has a proven track record in coloured gemstone mining, marketing and
promotion.  The Company has  achieved a tenfold  increase in achievable  rough 
gemstone sales prices  over the  past four  years as  a direct  result of  its 
focussed marketing initiatives  and regular closed  tender auctions that  have 
ensured a consistent supply of high quality ethically sourced emeralds to  the 
world markets.  Additionally,  Gemfields  has established  a  wholesale  sales 
division whose  focus  is  on assisting  both  down-stream  manufacturers  and 
up-stream retailers  gain  greater  access to  global  supply.   However,  the 
Company strongly believes  that the  potential for  continued and  sustainable 
increases in  demand  for  coloured gemstones  requires  the  endorsement  and 
backing of  high-end  brand  positioning and  specialist  retail  distribution 
outlets, both of which will be achieved through the Proposed Acquisition.

 

Gemfields currently receives  revenue from  the production and  sale of  rough 
gemstones.  Access to a retail platform through Fabergé will allow the Company
to maximise returns  at all  of the typically  high margin  points across  the 
supply and  distribution chain  -  namely mining,  rough gem  sales,  polished 
gemstone  sales and retail - while at the same time providing direct access to
the end consumer and greater control of the final positioning of its products.
 The Directors believe that Fabergé will  become an important vehicle for  the 
marketing and delivery of gemstones within the Enlarged Group and will act  as 
a flagship  for its  products, driving  the aspirational  positioning of,  and 
consumer demand for,  coloured gemstones  across all price  points within  the 
sector.  

 

Gemfields presently sells rough gemstones to its clients through closed tender
auctions, some  of  whom elect  to  send their  polished  gems to  London,  on 
consignment, for Gemfields to onward sell to select retailers at trade prices.
 Many of these gems  could be readily  used in Fabergé  jewellery and sold  to 
consumers at retail  prices, thereby capturing  significant additional  margin 
for the Enlarged Group.  

 

Fabergé will additionally provide a platform for Gemfields to further  develop 
the concept of "ethically branded gemstones",  along similar lines to that  of 
Forevermark diamonds.

 

Brand names and access to global luxury market

 

Fabergé  is  one   of  the  most   recognised  luxury  brand   names  with   a 
well-documented and globally recognised  heritage. The Company estimates  that 
building such a  renowned brand name  from scratch would  take a  considerable 
investment in time and money and would  ultimately be likely to cost far  more 
than the Proposed Acquisition.  

 

Fabergé will provide Gemfields with entry  to the global luxury market,  which 
was estimated to be worth  US$244 billion in 2011 and  is forecast to grow  to 
US$305 billion  by  2014.   The  hard luxury  market,  which  includes  luxury 
jewellery, watches, pens  and lighters, represented  approximately 22%  (US$54 
billion) of the total luxury goods market in 2011. 

 

Access  to  this  market  is  expected  to  broaden  Gemfields'  investor  and 
institutional appeal beyond the traditional mining investment community.

 

The opportunity

 

The  Proposed   Acquisition  offers   significant  marketing,   communication, 
management  and  supply  chain  synergies  which  should  improve  operational 
efficiencies within the Enlarged Group.

 

Cost savings through combined marketing and co-branding in the Enlarged  Group 
will ensure that  the core  focus on coloured  gems drives  and promotes  both 
companies and the industry as a whole. The Proposed Acquisition will  optimise 
buying power in terms  of advertising and  celebrity endorsements whilst  also 
increasing the Company's influence over product positioning - helping to drive
consumer demand and awareness of coloured gemstones.

 

Gemfields will gain a geographic presence  in New York, Geneva and Hong  Kong, 
whilst Fabergé will  gain a  presence in India,  a market  well understood  by 
Gemfields, but as yet untapped by Fabergé.  The Enlarged Group will be a truly
global  company  with  operations  spread  over  seven  time  zones  in  eight 
countries.

 

The combination will  allow the  Enlarged Group  to increase  the breadth  and 
depth of its product  offering and to mine  and market other premium  coloured 
gems whilst combining the two companies' luxury and gemstones expertise.  

 

The effect on the Enlarged Group 

 

In addition to  the effect on  Gemfields' business through  the synergies  and 
strategic  enhancement  described  elsewhere  in  this  announcement,  from  a 
financial perspective, Gemfields recorded a profit before tax and  exceptional 
items of US$47.8 million for the year  to 30 June 2012. Had the two  companies 
been combined  for  that  financial  period,  based  on  the  Fabergé  audited 
financials for the year  to 31 March 2012  split proportionally for the  final 
nine months, and the unaudited management accounts for the 3 months to 30 June
2012, the Enlarged  Group's combined  revenues would have  risen from  US$83.7 
million to US$90.7  million and the  profit before tax  and exceptional  items 
would have fallen from US$47.8 million to US$30.5 million for the period.  The 
anticipated growth rate  of the Fabergé  business is described  in the  "About 
Fabergé" section of this announcement.  

 

Principal terms of the Proposed Acquisition

 

Implementation Agreement

 

The  Company,  the  Majority  Fabergé   Shareholders,  Fabergé  and  a   newly 
incorporated wholly owned subsidiary  of Gemfields, incorporated under  Cayman 
law for the purposes of the Proposed Acquisition ('Gemfields Cayman')  entered 
into an Implementation Agreement  dated 21 November  2012 whereby Fabergé  and 
Gemfields Cayman propose  to implement a  plan of merger  merging Fabergé  and 
Gemfields Cayman  into  a  single  merged entity.   In  consideration  of  the 
cancellation of the Fabergé Shares, Fabergé Shareholders will receive Ordinary
Shares in Gemfields subject to any dissenting rights.

 

The Implementation Agreement,  and completion  of the  Merger, is  conditional 
upon, inter alia, the Unbundling, the Whitewash, the Section 190 Approval  and 
the admission of the  Consideration Shares to trading  on AIM.  The Merger  is 
also conditional  upon  the  shareholder approval  of  Fabergé,  however,  the 
Majority  Fabergé  Shareholders  undertake  pursuant  to  the   Implementation 
Agreement to  vote in  favour of  the Merger,  which in  itself constitutes  a 
sufficient majority to pass this resolution.

 

The  Implementation  Agreement  provides  customary  warranty  and   indemnity 
protection in favour of the Company in relation to matters relating to Fabergé
and its  business  and obligations  with  respect  to the  management  of  the 
business prior to Completion.

 

The Company also has the right  to terminate the Implementation Agreement  and 
halt the Merger in certain  circumstances prior to Completion, in  particular, 
in the event  of a  breach of  the warranties  set out  in the  Implementation 
Agreement, the  Majority  Fabergé  Shareholders  not  complying  with  certain 
pre-Completion obligations or the occurrence  of a material adverse change  in 
the business of Fabergé.  The Majority Fabergé Shareholders may terminate  the 
Implementation Agreement  and halt  the  Merger in  the  event of  a  material 
adverse change to the business of Gemfields prior to Completion.

 

Consideration

 

The consideration  payable  pursuant  to  the  Proposed  Acquisition  will  be 
satisfied by the issue of up to 214 million Consideration Shares, representing
approximately  39.6%  of  the  Enlarged  Issued  Share  Capital  (assuming  no 
Dissenting Shareholders).  Each  Fabergé  Shareholder  shall  be  entitled  to 
receive such  proportion  of the  Consideration  Shares  as is  equal  to  the 
proportion of Fabergé  Shares that  the Fabergé Shareholder  holds in  Fabergé 
immediately prior to Completion.

 

The Proposed Acquisition values Fabergé  at approximately US$142 million  (£89 
million), on  the basis  of a  30 day  volume weighted  share price  as at  20 
November 2012 and at approximately US$133 million (£83 million), on the  basis 
of the price of Ordinary Shares as at 20 November 2012.

 

Pursuant to Cayman law, Fabergé Shareholders have limited rights of dissent to
the terms of the Merger, with their right of appeal restricted to whether  the 
Fabergé Shareholder  has  received  fair  value for  the  Fabergé  Shares.   A 
Dissenting Shareholder cannot hold up  completion of the Proposed  Acquisition 
and any adjustment  agreed with respect  to the fair  value of the  Dissenting 
Shares would be agreed on  an individual basis but may  be payable in cash.  A 
commitment has been received pursuant to the Implementation Agreement from the
Majority Fabergé  Shareholders that  they  will not  exercise their  right  to 
dissent under the Merger with respect to their respective holdings in Fabergé,
which in  aggregate equates,  immediately  prior to  Completion, to  93.3%  of 
Fabergé Shares in issue.

 

New Relationship Agreement

 

At present, the 59.1%  stake in the  Company owned by Rox  is governed by  the 
Existing Relationship Agreement (see below).

 

On completion of the  unbundling of Rox, and  after the Proposed  Acquisition, 
Pallinghurst will individually hold approximately 48.0% of the Enlarged Issued
Share  Capital  (assuming  no   Dissenting  Shareholders)  and  the   combined 
Pallinghurst Group will hold approximately 49.3% of the Enlarged Issued  Share 
Capital (assuming no  Dissenting Shareholders).  As  a result of  this, it  is 
proposed  that  the  Company  and   Pallinghurst  will  enter  into  the   New 
Relationship Agreement to manage the ongoing relationship between them.

 

Pursuant  to  the  New  Relationship  Agreement,  associates  of  Pallinghurst 
include,  inter  alia  (i)  any  company  which  is  a  subsidiary  or  parent 
undertaking  of  Pallinghurst;  (ii)  any  company  whose  directors  act   in 
accordance with Pallinghurst's directions  or instructions, (iii) any  company 
in the capital of which  Pallinghurst or any entity  listed under (i) or  (ii) 
holds 30%  or more  of the  voting rights  and is  able to  appoint or  remove 
directors; and  (iv)  'Related  Parties'  of  Pallinghurst  and  such  parties 
referred to at (i), (ii) and (iii) (as such term is defined in the AIM Rules).

 

The New Relationship Agreement provides  that Pallinghurst shall exercise  all 
its powers and procure that any non-independent directors and Related  Parties 
exercise their powers to ensure that, inter alia,: (i) the Company has its own
dedicated management which  shall operate  and take  decisions independent  of 
Pallinghurst; (ii) the business and affairs  of the Company be carried out  in 
accordance with its constitution and for the benefit of its shareholders as  a 
whole; (iii) independent directors shall constitute at least 50% of the  board 
and all committees  (save for  the audit  committee to  which different  rules 
apply); (iv) the  Company shall comply  with the principles  of best  practice 
adopted by  UK AIM  companies  and any  relevant  market rules  or  regulatory 
requirements; (v) no agreement shall be  entered into between the Company  and 
Pallinghurst or any of its associates  unless approved by the board  including 
the non-independent directors; (vi) all  transactions between the Company  and 
Pallinghurst and its associates  shall be carried out  on arm's length  terms; 
and (vii) Pallinghurst shall not sell, transfer or agree to sell, transfer  or 
otherwise dispose of its shares which would reduce its aggregate holding to  a 
level below 30% of the voting rights  without giving the Company at least  two 
business days' notice. 

 

In addition,  Pallinghurst  and  its  associates are  also  bound  by  certain 
non-compete provisions to prevent them from, inter alia, competing, or holding
interests of  more than  10% in  companies that  compete, with  the  Company's 
business (subject to certain exceptions). Pallinghurst and its associates must
also not solicit  for employment any  group employee or  induce or attempt  to 
induce any  group  employee  to terminate  its  employment  relationship.  The 
parties are bound by certain confidentiality obligations.

 

Lock-In Agreement

 

The Consideration Shares issued to Pallinghurst and Fabergé Conduit Limited in
connection with the  Proposed Acquisition will  be subject to  the terms of  a 
lock-in agreement which provides that lock-in provisions shall apply,  subject 
to limited  exceptions,  for  12  months  from  the  date  of  Completion  and 
thereafter a further 12 months of orderly market sale provisions shall  apply. 
In addition, Canaccord is granted certain powers to sell Consideration  Shares 
held under  the  lock-in  to  satisfy any  settled  claim  against  either  of 
Pallinghurst or Fabergé Conduit Limited under the Implementation Agreement.

 

Related party opinion and AIM Rules

 

The acquisition  of Fabergé  represents a  related party  transaction for  the 
Company under Rule 13 of the AIM  Rules by virtue of the Pallinghurst  Group's 
direct and indirect holdings in the Company (further explained below) and  its 
direct and indirect holdings in Fabergé.  Sean Gilbertson is also an executive
director of both the Company and Fabergé. The Independent Directors  consider, 
having consulted with  the Company's  nominated adviser,  Canaccord, that  the 
terms of  the Proposed  Acquisition are  fair and  reasonable insofar  as  the 
Company's Shareholders are concerned.

 

Given the size of the Proposed Acquisition, the Company has also provided such
disclosure as is required in accordance with Rule 12 and Schedule 4 to the AIM
Rules for Companies as a substantial transaction.

 

Rox unbundling

 

Pallinghurst, Investec Pallinghurst and NGPMR together hold 100% of the issued
share capital  of  Rox Conduit  Limited  (Pallinghurst holds  49.1%,  Investec 
Pallinghurst 27.8% and NGPMR 23.1% of Rox). Rox Conduit Limited in turn  holds 
100% of the issued share capital of Rox, which holds 59.1% of the issued share
capital of the Company.   In addition to  Pallinghurst's indirect interest  in 
the Company through Rox, Pallinghurst also  directly holds a further 3.9%.  of 
the issued share capital of the Company.

 

On 6 June  2008, Rox and  the Company entered  into the Existing  Relationship 
Agreement governing the relationship between the two parties and ensuring that
the Company and its subsidiaries were capable  at all time of carrying on  its 
business independently of Rox  and that all  transactions between the  Company 
and Rox were on arm's length terms on a normal commercial basis.

 

Rox is proposing to take steps so that neither it nor its parent, Rox  Conduit 
Limited, will hold any shares directly in the Company (such steps are referred
to in this announcement as the "Unbundling"). Both Rox and Rox Conduit Limited
would be  wound  up  as  part  of  the  Unbundling.  Upon  completion  of  the 
Unbundling, Pallinghurst,  Investec  Pallinghurst  and  NGPMR  will  all  hold 
Ordinary Shares directly  which will mean  that, subject to  the rules of  the 
Takeover Code, they can vote independently upon Completion. The Unbundling  is 
a condition  precedent to  Completion and  is expected  to complete  prior  to 
Admission. Immediately following  the Unbundling, the  constituent members  of 
the Concert Party will make a submission to the Panel to show that they are no
longer acting in concert and should be deemed to be independent.

 

Following this Unbundling, the Existing  Relationship Agreement will cease  to 
have effect and Pallinghurst will enter into the New Relationship Agreement as
described above.

 

The  Concert  Party's  holding  in  the  Company  immediately  following   the 
Unbundling will be as follows:

 

Concert     Party                                                     Ordinary 
Shares                              Interest in Company

Pallinghurst                                                     107,433,181   
                                   33.0%

Investec   Pallinghurst                                         53,491,942     
                                   16.4%

NGPMR                                                                          
44,428,516                                        13.6%

 

Rule 9 waiver and Concert Party

 

The  Company's  current  largest  Shareholder  is  Rox,  who  presently   owns 
approximately 59.1%  of  the Company.   The  Pallinghurst Group,  through  its 
direct and indirect holdings, is currently interested in 33.0% of the  Company 
and Investec Pallinghurst and NGPMR are currently interested in  approximately 
16.4% and 13.6% of the Company respectively.  The Pallinghurst Group will have
an interest of 74.0% in Fabergé assuming conversion of debt on Completion.    

 

Notwithstanding the Unbundling, the Concert  Party is currently considered  to 
be acting in concert for the purposes of the Takeover Code and their aggregate
shareholding prior to the Unbundling  and prior to allotment of  Consideration 
Shares is 205,353,639 Ordinary Shares, representing approximately 63.0% of the
current issued share capital of the Company.   

 

Pursuant to the Proposed  Acquisition, the Pallinghurst  Group will receive  a 
maximum of 158,453,409 Consideration  Shares (assuming Pallinghurst  Resources 
Management does not dissent) as a result of its direct holding in Fabergé  and 
also its indirect interest  by virtue of its  shareholding in Fabergé  Conduit 
Limited.  The Concert  Party will  together receive a  maximum of  201,303,376 
Consideration Shares  (assuming  Pallinghurst Resources  Management  does  not 
dissent) and  their  aggregate  holding  on  Completion  will  be  406,657,015 
Ordinary Shares, representing approximately 75.3% of the Enlarged Issued Share
Capital (assuming no Dissenting  Shareholders). The maximum potential  holding 
of the Concert Party,  assuming all minority  Shareholders dissent other  than 
Pallinghurst   Resources   Management,   is   406,657,015   Ordinary   Shares, 
representing  approximately  77.2%  of  the  Enlarged  Issued  Share  Capital. 
However, immediately  post-Completion and  post  the Unbundling,  the  Concert 
Party intends to  make a  submission to  the Panel to  show that  they are  no 
longer acting  in  concert and  should  be  deemed to  be  independent.  Their 
individual shareholdings post-Unbundling and pre-Completion will therefore  be 
as set out above.

 

The Panel has confirmed  that due to  the current size of  the holding of  the 
Concert Party  being over  50%,  collectively they  will  be able  to  receive 
Consideration Shares  without triggering  an obligation  under Rule  9 of  the 
Takeover  Code.   However,  due  to  the  increase  in  the  holding  of   the 
Pallinghurst Group as a result of the issue of Consideration Shares, in  order 
not to  trigger  an  obligation  under  Rule  9  of  the  Takeover  Code,  the 
Independent Shareholders  of the  Company  must waive  the obligation  on  the 
Pallinghurst Group to  make a  mandatory offer under  Rule 9  of the  Takeover 
Code.

 

Shareholdings of the Concert Party and the Pallinghurst Group

 

Name of Entity  Share Interest     % Interest in  Entitlement to Share Interest Interest in
                 in Company on         Company on  Consideration     in Company     Company
                                      20 November         Shares    immediately immediately
                20 November  2012          2012^1                     following   following
                                                                    Admission^2 Admission^2

 
Pallinghurst          107,433,181           33.0%    151,475,599    258,908,780       48.0%

                                                                                           
Pallinghurst                    -               -      5,391,081      5,391,081        1.0%
Founder
                                                                                           
 
Pallinghurst                    -               -      1,586,729      1,586,729        0.3%
Resources
Management                                                                                 

                                                                                           
Investec               53,491,942           16.4%     14,781,229     68,273,171       12.6%
Pallinghurst
                                                                                           
 
NGPMR                  44,428,516           13.6%     28,068,738     72,497,254       13.4%

                                                                                           

                                                                                           
The                   107,433,181           33.0%    158,453,409    265,886,590       49.3%
Pallinghurst
Group
Concert Party         205,353,639         63.0%^3    201,303,376    406,657,015       75.3%

 

^ 

^1 Latest practicable date prior to the date of this announcement and assuming
the Unbundling takes place

^2 Assuming there are no Dissenting Shareholders

^3 Consists of 59.1% holding by Rox and 3.9% direct holding by Pallinghurst.

 

 

Shareholders should note that:

 

(a)  On Admission, and assuming Dissenting Shareholders holding not more  than 
131,087 Fabergé Shares dissent to  the Merger and that Pallinghurst  Resources 
Management is not a Dissenting Shareholder, Pallinghurst individually, and the
Pallinghurst  Group  collectively,  will  be  interested  in  Ordinary  Shares 
carrying more than 30% but less than  50% of the voting rights of the  Company 
and will  have  increased its  share  of the  voting  rights pursuant  to  the 
Proposed Acquisition and  consequent issue of  Consideration Shares.  However, 
post-Admission no member of  the Pallinghurst Group will  be able to  increase 
its percentage interest  in the  voting rights  of the  Company without  Panel 
consent. If it did so it would incur an obligation to make a general offer for
the Company under Rule 9 of the Takeover Code.

 

(b)   On Admission,  in the  event Dissenting Shareholders  holding more  than 
131,087 Fabergé Shares dissent to the Merger, the Pallinghurst Group (assuming
Pallinghurst  Resources   Management   is  not   a   Dissenting   Shareholder) 
collectively will be interested in Ordinary  Shares carrying more than 50%  of 
the voting rights  of the Company  and will  have increased its  share of  the 
voting rights  of  the  Company  pursuant  to  the  Proposed  Acquisition  and 
consequent issue of Consideration Shares.

 

(c)   Following Admission,  and assuming all  Fabergé Shareholders other  than 
the Majority Fabergé Shareholders  and Pallinghurst Resources Management  give 
notice of dissent with respect to their Fabergé Shares, the Pallinghurst Group
will control a maximum of 50.4% of the voting rights of the Company. This  may 
in turn have the effect of reducing  the liquidity of trading in the  Ordinary 
Shares on AIM. The voting rights of the Company held by the Pallinghurst Group
will also mean that the  Pallinghurst Group will be able  to, if it so  wishes 
and subject to  the terms  of the  New Relationship  Agreement, pass  ordinary 
resolutions and exert significant influence over special resolutions  proposed 
at future general meetings of the Company.

 

(d)   Following Admission, Investec  Pallinghurst and NGPMR  intend to make  a 
submission to the Panel to show that they are no longer acting in concert  and 
should be deemed to be  independent.  If the Panel deem  the parties to be  no 
longer acting in concert, they will be  free to acquire shares in the  Company 
without being  required to  make a  Rule 9  offer providing  their  individual 
holdings remain less than 30% of the voting rights of the Company.

 

            Where the  Pallinghurst Group holds  more than 50%  of the  voting 
rights of the Company  and Pallinghurst individually holds  more than 30%  but 
less than 50% of the  voting rights of the  Company, Pallinghurst will not  be 
able to increase its percentage interest  in the voting rights of the  Company 
without Panel consent. If  it did so  it would incur an  obligation to make  a 
general offer for the Company under Rule  9 of the Takeover Code.  Each  other 
member of the Pallinghurst Group will however be free to acquire shares in the
Company without  being  required  to  make a  Rule  9  offer  providing  their 
individual holdings remain less than 30% of the voting rights of the Company.

 

Rule 9 fairness opinion

 

Canaccord has provided advice to the Independent Directors in relation to  the 
Whitewash in accordance with the requirements of paragraph 4(a) of Appendix  1 
to the Takeover Code.

 

This advice was provided by Canaccord  to the Independent Directors only  and, 
in providing such  advice, Canaccord  has taken into  account the  Independent 
Directors' commercial  assessments  as  well  as,  but  not  limited  to,  the 
confirmations of the future intentions of the Concert Party as set out below.

 

The Independent Directors,  who have  been so advised  by Canaccord,  consider 
that the approval of  the Whitewash by  the Panel of  any requirement for  the 
members of the  Concert Party to  make a general  offer to shareholders  under 
Rule 9 of the Takeover Code, is fair and reasonable and in the best  interests 
of the Independent Shareholders and the Company as a whole.

 

Intentions of the Pallinghurst Group

 

The Pallinghurst  Group (other  than  Pallinghurst Resources  Management)  has 
confirmed that, following Completion,  its intention is  that the business  of 
the Company be continued  in the same manner  as at present. The  Pallinghurst 
Group  (other  than  Pallinghurst  Resources  Management)  also  supports  the 
Company's objectives pursuant of its growth and mine to market strategy. 

 

Section 190 Approval

 

Pursuant to Section 190 of the Companies  Act, the Company may not enter  into 
an arrangement under which the Company acquires or is to acquire a substantial
non-cash asset (directly or  indirectly) from a Director  of the Company or  a 
person so connected. For  these purposes, a 'substantial  non-cash asset is  a 
substantial asset in relation to the  company if its value either (a)  exceeds 
10% of the  company's asset  value and  is more  than £5,000,  or (b)  exceeds 
£100,000.

 

Autumn, which has an approximate interest  of 0.5% in Fabergé, is a  connected 
person of Sean Gilbertson by virtue of Mr. Gilbertson and other members of his
family being named beneficiaries in a trust  that is the holder of 50% of  the 
issued share capital of Autumn. 

 

Pallinghurst Resources Management, which has  an approximate interest of  0.7% 
in Fabergé, is  also a  connected person  of Mr  Gilbertson by  virtue of  Mr. 
Gilbertson holding a 50% interest in both the general partner and the  limited 
partner of Pallinghurst Resources Management.

 

Pursuant to the terms of the Merger, each of Autumn and Pallinghurst Resources
Management will receive Consideration Shares in exchange for the  cancellation 
of its Fabergé Shares.

 

Shareholder approval is  required prior to  the Company issuing  Consideration 
Shares to either of Autumn or Pallinghurst Resources Management.

Annual General Meeting

 

At the  Company's Annual  General Meeting  to  be held  in December  2012  the 
following resolutions relating to the Proposed Acquisition will be proposed:

 

(a)        An  ordinary resolution,  to  be taken  on  a poll  of  Independent 
Shareholders, to approve the Whitewash  of the obligation on the  Pallinghurst 
Group to make a  general offer for  the Company under Rule  9 of the  Takeover 
Code on receipt of Consideration Shares.

 

(b)        An ordinary resolution to approve the issue of Consideration Shares
to Autumn and Pallinghurst Resources  Management resulting from completion  of 
the Proposed Acquisition.

 

A circular  and notice  of Annual  General Meeting  is being  prepared and  is 
expected to be sent to Shareholders shortly.

Recommendation

 

The Whitewash and the Proposed  Acquisition are conditional upon, inter  alia, 
the passing by the Shareholders of the resolutions described above.

 

The Independent Directors, who have been so advised by Canaccord, consider the
Whitewash to be fair and reasonable and  in the best interests of the  Company 
and  the  Independent  Shareholders  as  a  whole  and  unanimously  recommend 
Independent Shareholders to vote in favour of this resolution.

 

Pallinghurst Group and each  other member of the  Concert Party is  prohibited 
under the  Takeover  Code  from (and  will  not  be) voting  its  interest  in 
205,353,639 Ordinary Shares, representing 63.0% of the issued share capital in
relation to the resolution to approve the Whitewash.

 

The Independent Directors consider the Section 190 Approval to be in the  best 
interests of  the Company  and its  Shareholders as  a whole  and  unanimously 
recommend Shareholders to vote in favour of this resolution.

Responsibility

 

The Independent Directors accept responsibility for the information  contained 
in this  announcement  save  that  the only  responsibility  accepted  by  the 
Independent Directors  in  respect of  the  information in  this  announcement 
relating to Fabergé, the Pallinghurst Group and the Concert Party has been  to 
ensure that  such information  has  been correctly  and fairly  reproduced  or 
presented (and  no steps  have been  taken  by the  Directors to  verify  this 
information) and to the  best of the knowledge  and belief of the  Independent 
Directors (who  have taken  all reasonable  care to  ensure that  such is  the 
case), the information contained  in this announcement  for which they  accept 
responsibility is in  accordance with  the facts  and does  not omit  anything 
likely to affect the import of such information.

 

Sean Gilbertson accepts responsibility for  the information contained in  this 
announcement that  relates to  Fabergé, the  Pallinghurst Group,  the  Concert 
Party and the  Unbundling save  that the  only responsibility  accepted by  Mr 
Gilbertson in  respect of  the information  in this  announcement relating  to 
NGPMR and Investec Pallinghurst has been  to ensure that such information  has 
been correctly and  fairly reproduced  or presented  (and no  steps have  been 
taken by Mr  Gilbertson to verify  this information)  and to the  best of  the 
knowledge and belief of  Mr Gilbertson (who has  taken all reasonable care  to 
ensure that such is the case), the information contained in this  announcement 
for which he accepts responsibility is  in accordance with the facts and  does 
not omit anything likely to affect the import of such information.

Additional Information

 

Following Completion, application will  be made to  the London Stock  Exchange 
for the Consideration Shares to be admitted to trading on AIM.  It is expected
that Admission will  become effective, and  that trading in  the new  Ordinary 
Shares will commence on the  later of 22 January  2013 and five business  days 
following the Implementation Agreement  becoming wholly unconditional but  for 
Admission.

 

The new Ordinary Shares will, when issued  and fully paid, rank pari passu  in 
all respects with the existing Ordinary Shares, including the right to receive
any dividend or other distribution declared or made after Admission.

 

Following Admission  (and assuming  no Dissenting  Shareholders), the  Company 
will have 539,773,207 Ordinary Shares in issue, none of which will be held  in 
treasury. 

 

This announcement does not constitute, or form  part of, an offer to sell,  or 
the solicitation of an offer to subscribe for or buy any securities.

 

This announcement is not an offer of securities for sale in or into the United
States. Any securities issued in connection with the Proposed Acquisition have
not been and will not  be registered under the US  Securities Act of 1933,  as 
amended (the  "Securities Act")  and may  not be  offered, sold,  taken up  or 
renounced in the United States absent registration under the Securities Act or
an applicable  exemption  from such  registration.  There will  be  no  public 
offering of securities in the United States. The Ordinary Shares have not been
and will not be registered with any regulatory authority of any state or other
jurisdiction of the United States.

 

 

 

                                 APPENDIX II

                                       

                                 Definitions

                                       

"Admission"                  admission of the Consideration Shares to  trading 
                             on AIM becoming effective in accordance with Rule
                             6 of the AIM Rules
"AIM"                        the market operated by the London Stock Exchange
"AIM Rules"                  the rules published by the London Stock  Exchange 
                             entitled AIM Rules  for Companies  in force  from 
                             time to time
"Annual General Meeting"     the annual general meeting  of the Company to  be 
                             held in December 2012
"Autumn"                     Autumn Holdings Asset, Inc.
"Canaccord"                  Canaccord Genuity Limited
"Circular"                   the  circular  to   be  posted  to   Shareholders 
                             attaching  the  notice  of  the  Annual   General 
                             Meeting
"Companies Act"              Companies Act 2006
"Company" or "Gemfields"     Gemfields plc
"Completion"                 Completion of the Proposed Acquisition
"Concert Party"              Pallinghurst, Investec Pallinghurst and NGPMR and
                             each party's respective affiliated persons, which
                             together are deemed to  be acting in concert  for 
                             the purposes of the Takeover Code
"Consideration Shares"       the new ordinary  shares of  1 pence  each to  be 
                             issued pursuant to the Merger
"Directors" or "Board"       the directors of the Company
"Dissenting Shareholder"     a Fabergé Shareholder that  has dissented to  the 
                             Merger
 
"Dissenting Shares"          Fabergé Shares held by a Dissenting Shareholder
"Enlarged Group"             the Company, its subsidiaries and its  subsidiary 
                             undertakings, including Fabergé, its subsidiaries
                             and   its   subsidiary   undertakings   following 
                             Completion
 
                             the issued ordinary share capital of the  Company 
"Enlarged    Issued    Share immediately following Admission
Capital"

 
"Existing       Relationship the relationship  agreement  dated  6  June  2008 
Agreement"                   governing the  relationship between  Rox and  the 
                             Company
 
                             Fabergé Limited
"Fabergé"
                             holders of Fabergé Shares
"Fabergé Shareholders"
                             the ordinary shares in Fabergé
"Fabergé Shares"
                             Runway  SPV,   a  wholly   owned  subsidiary   of 
"Gemfields Cayman"           Gemfields
"Group"                      the Company, its subsidiaries and its  subsidiary 
                             undertakings

                              
"Implementation Agreement"   the implementation  agreement dated  21  November 
                             2012  between the  Majority Fabergé  Shareholders 
                             and the Company implementing the Merger
"Independent Directors"      Graham Mascall, Ian  Harebottle, Devidas  Shetty, 
                             Clive Newall and Finn Behnken
 
"Independent Shareholders"   the  Shareholders  other  than  members  of   the 
                             Concert Party
"Investec Pallinghurst"      Investec Pallinghurst (Cayman) L.P.
"J.P. Morgan Cazenove"       J.P.  Morgan  Limited,  which  conducts  its   UK 
                             investment  banking  business   as  J.P.   Morgan 
                             Cazenove
"London Stock Exchange"      London Stock Exchange plc

"Majority            Fabergé Fabergé Conduit Limited and Pallinghurst
Shareholders"
"Merger"                     the  merger  of  Fabergé  and  Gemfields   Cayman 
                             pursuant to Part XVI of the Cayman Companies Law
"New Relationship Agreement" the relationship  agreement  to be  entered  into 
                             between   Pallinghurst   and   the   Company   on 
                             completion  of  the   Unbundling  governing   the 
                             relationship between Pallinghurst and the Company
"NGPMR"                      NGPMR Cayman L.P.
"Ordinary Shares"            ordinary shares of 1 pence each in the capital of
                             the Company
"Pallinghurst"               The Pallinghurst Resources Fund L.P.
"Pallinghurst Founder"       Pallinghurst (Cayman) Founder L.P.
"Pallinghurst Group"         Pallinghurst,    Pallinghurst     Founder     and 
                             Pallinghurst  Resources   Management  which   are 
                             deemed to be acting  in concert for the  purposes 
                             of the Takeover Code
"Pallinghurst      Resources Pallinghurst Resources Management L.P.
Management"
"Panel"                      the Panel on Takeovers and Mergers
"Proposed Acquisition"       the proposed acquisition by the Company of all of
                             the shares of Fabergé in issue at Completion
"Rox"                        Rox Limited
"Section 190 Approval"       approval by  Shareholders of  the acquisition  by 
                             the Company of Fabergé Shares from Autumn  and/or 
                             Pallinghurst Resources Management pursuant to the
                             terms of the Merger
"Shareholders"               holders of Ordinary Shares
"Takeover Code"              the City Code on Takeovers and Mergers
"UK" or "United Kingdom"     the United Kingdom of Great Britain and  Northern 
                             Ireland
"Unbundling"                 the proposed  restructuring whereby  Rox and  its 
                             parent company, Rox Conduit Limited, would  cease 
                             to hold any  shares directly in  the Company  and 
                             these shares would instead be held  independently 
                             by each of by Pallinghurst, Investec Pallinghurst
                             and NGPMR
"Whitewash"                  waiver  of  obligations  under  Rule  9  of   the 
                             Takeover Code of the Pallinghurst Group to make a
                             general offer for the entire issued share capital
                             of the Company to all Shareholders as a result of
                             the Proposed Acquisition
"£" and "pence"              respectively,  pounds  and  pence  sterling,  the 
                             lawful currency for the time being of the  United 
                             Kingdom

                              
""US$"                       the lawful  currency for  the time  being of  the 
                             United States of America

 

                     This information is provided by RNS
           The company news service from the London Stock Exchange
 
END
 
 
ACQLIFIRLVLLFIF -0- Nov/21/2012 07:01 GMT
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