VANCOUVER (CP) -- In a scathing review of the Vancouver-based company, Pala managing director Jan Castro cited "historic mismanagement" and "value destruction" as reasons shareholders should accept the offer to take Rockwell private.
Pala, which owns nearly 20% of Africa-focused Rockwell, is offering 36 cents per share, or about $85.7 million. The bid, made a week ago, is an 85% premium over the previous day's closing price.
"Pala has decided to move forward with what it sees now as the only means by which shareholder value can actually be realized," Castro told a conference call Tuesday.
"The choice for Rockwell shareholders is simple: An all-cash premium now, or continuing value destruction."
Rockwell, which refused to trade barbs with Pala on Tuesday, owns interests in alluvial, or river-bed, diamond projects and properties in South Africa and the Democratic Republic of Congo.
Pala Investments, based in Jersey, Channel Islands, is a $1.2-billion investment company with a focus on mining and natural resources.
Rockwell shares were trading down a half cent to 30 cents on the Toronto Stock Exchange Tuesday, with a 52-week range of between 16 cents in late August and 70 cents in October.
Castro also questioned Rockwell management's ownership of a private diamond company and the independence of the company's board of directors.
He said three Rockwell executives, who own 3.5 per cent of Rockwell, also own 100 per cent of diamond brokerage Flawless Diamond Trading House.
"The relationship between the two companies is alarming for Rockwell shareholders," said Castro, adding that the commission rate has never been publicly disclosed by Rockwell.
"This arrangement should keep shareholders up at night. Where are the arm's length transactions that shareholders should expect?"
Regulatory filings with the U.S. Securities and Exchange Commission list Flawless as a registered diamond broker that purchases diamonds from Rockwell at market prices. It lists Rockwell president and CEO John Bristow, sales and marketing manager Jeffrey Brenner, and operations director Hennie Van Wyk as shareholders in the company.
Overall, Castro said he believes Rockwell has been mismanaged.
"From production well below forecasts, to spiralling operating costs and inability to manage key issues, and a failure to deliver on prices, shareholder value has been eroded and the market has lost confidence it may once have had in this company," said Castro.
"Like you, we wished for better things since this company."
He also took a shot at Rockwell's announcement last week that it recovered an "exceptional" 189.6-carat gemstone diamond from its Klipdam mining operation in South Africa, calling it "a transparent attempt to distract shareholders attention from their massive and continuing failure to move their company forward."
Rockwell's Bristow would not comment on the criticism from Castro Tuesday, saying the company is preparing its response to the bid in the form of a shareholder circular.
"We've embarked on a very formal professional process .. and we will address all of those points that have been made," Bristow said in a brief interview.
"For us, corporate governance and making sure the company is run prudently is critical to the way we operate at Rockwell."
Pala, which has been trying to buy Rockwell for months, offered 40 cents per share for the company in late August.
Castro said Tuesday the offer price was dropped in the latest offer because of the "loss in economic value" when Rockwell didn't respond by the Sept. 5 deadline.
Rockwell said last week it was still organizing its response to the 40-cent bid.
Last week, Rockwell asked shareholders to hold off voting on Rockwell's latest offer while its board reviewed it further.
Bristow would not say Tuesday if the company plans to accept or reject the latest offer.
On Monday, Pala said it was denied by Rockwell the right to vote at the company's annual general meeting in London, "even though Pala and its agents had taken all required steps well in advance of the meeting to ensure its right to vote."
Rockwell responded early Tuesday saying Pala is not a registered shareholder of the company and did not meet requirements to send a proxy by the deadline.
Pala said it wasn't intending to replace Rockwell board at the meeting, but isn't ruling out legal action or regulatory intervention.
(c) Canadian Press
