Harry Winston Diamond Corp. said a minority stakeholder of the Ekati diamond mine sued to block the company’s proposed acquisition of BHP Billiton Ltd. (BHP)’s 80 percent share of the Canadian operation.
C. Fipke Holdings Ltd. alleged in an action in Ontario Superior Court of Justice that offers made by BHP to Fipke didn’t comply with Fipke’s rights under joint-venture agreements for Ekati, Toronto-based Harry Winston said yesterday in a statement. The suit also names Harry Winston, Stewart Blusson, who is another minority owner, and Blusson-controlled Archon (ACS) Minerals Ltd., according to the statement.
“If Chuck Fipke wants to buy Ekati, he wants to see the same deal that Harry Winston received from BHP,” John Hughes, an analyst at Desjardins Securities Inc. in Toronto, said yesterday by telephone. “According to Fipke, what he received does not comply with his rights.”
Harry Winston said Nov. 13 it had agreed to pay about $500 million for Melbourne-based BHP’s interests in the diamond mine as well as gem-marketing operations. Minority shareholders held pre-emptive rights to purchase BHP’s stake in the mine within 60 days in the event of a sale, BHP said in a separate statement on Nov. 13.
Fipke and Blusson discovered the Ekati deposit in the Northwest Territories in 1991.
Blusson declined to comment about the substance of the legal action when contacted yesterday by phone. Fipke didn’t return a call seeking comment.
Harry Winston and BHP believe that the claim by C. Fipke, known as Fipco, “is entirely without merit, and intend to vigorously defend the action in order to proceed with the purchase and sale of the Ekati mine,” Harry Winston said in the statement.
Harry Winston fell 2.2 percent to C$14.34 at the close in Toronto yesterday, while Vancouver-based Archon dropped 15 percent to 71 cents.
As part of the suit, Fipco claims that Harry Winston’s debt-financing arrangements for its acquisition of BHP’s interests interfered with Fipco’s ability to arrange its own financing, Harry Winston said in the statement.
“We believe that we have complied with our obligations under the Right of First Refusal provision and will work to resolve the dispute as soon as practical to ensure the sale process can be completed,” Ruban Yogarajah, a BHP spokesman, said yesterday by e-mail.
Earlier this week Harry Winston said it agreed to sell its luxury-jewelry unit to Swatch Group AG (UHR) for $1 billion, increasing the company’s reliance on diamond mining and helping it finance the bid for BHP’s stake in Ekati.
The sale to Swatch will enable Harry Winston to complete the Ekati acquisition “debt free,” Harry Winston Chief Executive Officer Robert Gannicott, 65, said Jan. 14 in a phone interview.
Gannicott also said his company is interested in buying the 60 percent stake of the Diavik diamond mine it doesn’t already own from Rio Tinto Group.
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