Comments on Recent Developments and Statements
in Media
Remarks on Consistent Efforts to Engage with
Washington Corporations and Fact that No Formal Offer Has Been
Made
Dominion Diamond Corporation (TSX:DDC, NYSE:DDC) (the “Company”
or “Dominion”) today re-confirmed that while its Board of Directors
remains confident in the Company’s long-term strategic plan and the
opportunity it provides to enhance value for all shareholders, as
it always has, the Board remains open to holding discussions with
Washington Corporations (“WashCorps”) on customary terms and in a
manner that protects the interests of the Company and its
stakeholders.
It is important to highlight to all Dominion shareholders
that:
- WashCorps has not made a formal offer
to Dominion or its shareholders. Should Dominion receive a formal
offer, the Board of Directors will assess it.
- Dominion has consistently told
WashCorps that it is prepared to engage in discussions on customary
terms in order to allow WashCorps to improve its conditional and
opportunistic indicative proposal.
- WashCorps has insisted on terms that
would give it a “free option” and present significant risks to the
Company and shareholder interests.
To provide clarity, Dominion is providing the correspondence
exchanged between the Company and WashCorps, which highlights the
aggressive and off-market terms and conditions proposed by
WashCorps in regards to its opportunistic indicative proposal, and
the Company’s responses.
WashCorps’ indication of interest was disclosed by press release
on March 19, 2017. All other correspondence between the parties is
below:
March 15, 2017
Lawrence R. Simkins, PresidentWashington CorporationsPost Office
Box 16630Missoula, MontanaUSA 59808
Dear Larry,
Thank you for your indicative proposal, and your interest in the
Company. Our board has carefully considered, again, the terms that
you have insisted on for discussions with us, including your
requirement for a lengthy period of exclusivity so that you can
begin your due diligence, your insistence that you be able to veto
our choice of CEO, and your refusal to accept a customary form of
standstill.
While we believe there is more value in the Company than
reflected in your indicative proposal, we are and have been
prepared to work constructively with you and to engage in
discussions with you on customary terms that would allow you to
undertake the due diligence that you have said you require and so
improve your view on value. However, we cannot, in the best
interests of the Company and its stakeholders, grant you
exclusivity, or the other rights that you have demanded, before you
have completed any due diligence and before we have a better view
from you on value.
If you are prepared to engage with us on the customary terms
that we have proposed, then I’m confident that our respective
advisors can settle an acceptable form of NDA and that you can
commence your due diligence promptly. If there is a basis to move
forward after you have completed this initial due diligence, then
we would be open to considering a period of exclusivity at that
time.
Sincerely,
Dominion Diamond Corporation/s/James K. GowansChairman
March 17, 201 7
STRICTLY CONFIDENTIAL
The Board of DirectorsDominion Diamond Corporation4920-52nd
Street Suite II02Yellowknife, NT XIA 3Tl Canada
Attention: James Gowans, Chairman
We write in response to your letter dated March 15, 2017 in
order to correct a number of mischaracterizations contained in that
letter. In this regard, we note the following:
- You have characterized our requested
period for exclusivity as “lengthy". This is incorrect. We
requested an exclusivity period in order to complete confirmatory
due diligence and negotiate an acquisition agreement that is
entirely usual, if not extremely quick, for a transaction of this
size and nature. We are able to move quickly because we have
already retained financial, legal, tax and accounting advisors and
spent a considerable amount of time and money assessing this
opportunity. Further, we note that if the board of directors had
engaged with us on February 21st, the exclusivity period would be
approximately half over by now.
- You have characterized us as being at
the beginning point our due diligence. This is incorrect. As
explained in our proposal and to the board of directors in-person,
we have completed a substantial amount of due diligence based on
your public record, public sources and our knowledge of the mining
industry. As the board of directors knows, the public record of a
public Canadian mining company is quite detailed.
- You have characterized our proposal as
an insistence that we would be able to veto your choice of CEO.
This is incorrect. We specifically provided that the board of
directors could continue it search for a new CEO. What we requested
was that you not hire the new CEO during the period of the
exclusivity where we were jointly working together towards a
transaction. As we repeatedly explained, no public company CEO
candidate would want to be hired to learn that the board of
directors was considering the possible sale of the Company. You
would have to disclose this to the candidate. The pursuit of our
proposal and the search for a new CEO are parallel paths. Again, if
the board of directors had engaged with us on February 21st, the
exclusivity period would be approximately one-half over by
now.
- You continue to mention “customary
terms” of a standstill. This is incorrect. You sent us a form of
non-disclosure agreement that contained a broad standstill, which
had never been raised or discussed with us. This standstill is not
customary in these circumstances and we proposed a reasonable
alternative. We were inclined to reject this outright but advised
you on March 14th that we would compromise and agree to a
standstill under which we cannot acquire shares, make an
unsolicited offer or sponsor a proxy fight during the standstill
period.What we advised we were not prepared to do was to restrict
our ability to publicly disclose the existence and terms of our
proposal if we could not come to an agreement with the board of
directors on a transaction during the exclusivity period. We
requested this in part because we became worried about
non-engagement by the board and that a standstill could be used to
"just say no" for the full duration of the standstill period.
- You indicated that the board of
directors cannot, in the best interests of the Company and its
stakeholders, grant us exclusivity before we have completed any due
diligence. This is incorrect.
- We have advised that we have already
completed substantial due diligence.
- There is nothing at law or otherwise
that requires you to decline our proposed compromise form of
exclusivity. Our proposal is compelling and in the best interests
of the Company and its stakeholders. Further, we understand that
the Company has run a number of unsuccessful processes in the past
and we know that you are currently considering at least one other
alternative transaction so the board of directors is fully aware of
the available alternatives. In fact, we understand that the Company
has previously agreed to exclusivity as part of at least one of
those processes.
- You initially explained to us that you
could not grant exclusivity because the board of directors is
considering a competitive alternative transaction and that you were
in the midst of a search for a new CEO. We considered this and
advised you on March 10th that the board could continue to pursue
the alternative transaction and your CEO search during the
exclusivity period, provided that you did not enter an agreement
for an alternative transaction or hire a CEO during this period
(but could do so without restriction after this period). On March
14th, you advised that the board of directors could not agree to
exclusivity because you had other alternative transactions. We
considered this and advised that we would be prepared to consider
fully carving out your continued negotiation of other pre-existing
bona fide transactions from the exclusivity restrictions. We
believed these were all reasonable compromises, which you have now
indicated are not acceptable. We have been very clear and
consistent since we made our initial proposal that we would require
some form of exclusivity, as we are not prepared to be involved in
a process where our proposal is "shopped”. What is clear to us now
is that is exactly what the board of directors wants to be able to
do; otherwise you would have accepted our reasonable
compromises.
We believe that we would be excellent stewards of the Company
for the reasons previously articulated and that our February 21st
proposal is in the best interests of the Company and all its
stakeholders. Further, our all-cash premium proposal that is not
contingent on financing is extremely attractive to shareholders and
we believe it is not comparable to any other transactions you are
considering at this time.
We have considered your letter. We are not prepared to agree to
the onerous standstill provisions you have requested. We have made
several constructive and reasonable compromise proposals, all of
which you have rejected. We believe that your shareholders will be
very disappointed by your delays and ultimately the positions you
have taken.
Sincerely,
WASHINGTON CORPORATIONS/s/Lawrence R. Siskins, President
March 19, 2017
Lawrence R. Siskins, PresidentWashington CorporationsPost Office
Box 16630Missoula, MontanaUSA 59808
Dear Larry,
The board has received your response. Regrettably, your letter
distorts the facts.
By any measure your requested exclusivity period was lengthy,
and we have consistently indicated that we were not prepared to
grant it to you at this stage. You made it clear to us in our
discussions that you have not conducted technical diligence on our
unique assets, and that you do not have familiarity with the
diamond industry. Any past dealings by the Company are simply not
relevant to your present request, and would moreover be subject to
an obligation of confidentiality.
You have refused to agree to a customary standstill, and you
have insisted on being granted an unwarranted veto over decisions
that are at the sole discretion of the board, including, among
other things, our ability to choose and install a Chief Executive
Officer.
The board considered, responsibly and in good faith, your
unsolicited and conditional proposal, and invited you to present to
a full in-person meeting of the board and our advisors on March 9,
2017. While we believe that your proposal does not recognize the
full value of the Company, we are, and have been, prepared to work
constructively with you and allow you to conduct the due diligence
that you have requested, on standard and market customary terms
that protect the Company and its stakeholders. It is unfortunate
and surprising that you have refused to so do.
Entering into discussions on customary terms would surely allow
for both parties to work together constructively to determine if an
acceptable proposal is within the capabilities of the Washington
Group.
Sincerely,
Dominion Diamond Corporation/s/James K. GowansChairman
TD Securities Inc. is acting as financial advisor to the
Company, Stikeman Elliott LLP is acting as legal advisor and
Kingsdale as strategic advisors.
About Dominion Diamond CorporationDominion Diamond
Corporation is a Canadian diamond mining company with ownership
interests in two major producing diamond mines. Both mines are
located in the low political risk environment of the Northwest
Territories in Canada. The Company operates the Ekati Diamond Mine,
in which it owns a controlling interest, and also owns 40% of the
Diavik Diamond Mine. It supplies premium rough diamond assortments
to the global market through its sorting and selling operations in
Canada, Belgium and India.
For more information, please visit
www.ddcorp.ca
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170322005459/en/
Investors:Dominion Diamond CorporationJacqueline Allison,
416-205-4371Vice-President, Investor
Relationsjacqueline.allison@ddcorp.caorCanadian Media:DFH Public
AffairsJohn Vincic, 416-206-0118 x224orUS Media:Gagnier
CommunicationsDan Gagnier, 646-569-5897
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