Shares in Damas International rose 14 per cent yesterday as investors digested news of a potential bid for the Dubai jeweller by Mannai Corporation of Qatar.
Mannai, a retailer of cars, home appliances and other goods, said on Tuesday it had secured commitments from shareholders representing more than 58 per cent of Damas, at a price of not less than 45 US cents per share. But industry analysts said it was unclear from the information Mannai provided whether the deal would affect other minority investors, because the deal had been agreed privately.
"My first impression based on the information is that this is a private off-market offer being made to selective investors and is not a full on-market offer capable of being accepted by all shareholders of the listed entity in the DIFC [Dubai International Financial Centre]," said Sharon Ditchburn, the managing director of Capital Advantage, a corporate governance and compliance consultancy. "From a fair corporate governance perspective, we believe that the minority shareholders' interests may not have been addressed by this type of arrangement."
In developed markets, such as the UK and Australia, a company acquiring the majority of the shares in another company would trigger a mandatory offer to all shareholders.
"We would usually prefer to see that a full on-market offer is made to allow all shareholders, including those minority shareholders who have been disadvantaged by the actions of the company to date, in order for them to recognise the same benefit as the large shareholders," Ms Ditchburn said.
It is unclear whether Mannai will have to make a mandatory bid for all shares, should it bid for the 58 per cent of shares on which it has received secure commitments.
Mannai's announcement follows a move last week by Damas's former private owners, the Abdullah brothers, to hire a financial adviser to sell some of their stake in the company.
An offer by Mannai for 58 per cent of the shares would value the entire company at about US$445 million (Dh1.63 billion).
In 2010, the three brothers, Tawhid, Tawfiq and Tamjid Abdullah, were the subject of disciplinary action by the DIFC for withdrawing more than Dh600m of gold and cash from Damas without the approval of shareholders. The move brought the company to the brink of bankruptcy.
Damas shares were heavily traded before the announcement by Mannai, jumping by 13 per cent the previous day.
Ms Ditchburn called for information to be provided on the nature of the deal between Mannai and shareholders, and what that meant for the rest of the shareholder list and the future of the company.
"Further transparency of the arrangements would be highly regarded, including further details on the ability of the shareholders to sell the shares, and their future involvement in the company should new major shareholders be successful," she said.