Dominion Diamond to be Acquired by The Washington Companies for US$14.25 per Share in Cash | Business Wire

YELLOWKNIFE, Northwest Territories & MISSOULA, Mont.–(BUSINESS WIRE)–Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the “Company” or

“Dominion”) and The Washington Companies (“Washington”), a group of

privately held North American mining, industrial and transportation

businesses founded by industrialist and entrepreneur Dennis R.

Washington, today announced that they have entered into an arrangement

agreement (the “Arrangement Agreement”) under which an entity affiliated

with Washington will acquire all of Dominion’s outstanding common shares

for US$14.25 per share in cash or a total equity value of approximately

US$1.2 billion pursuant to a plan of arrangement (the “Arrangement”)

under the Canada Business Corporations Act. The transaction represents a

44 percent premium to Dominion’s unaffected share price of US$9.92 on

March 17, 2017. The transaction marks the result of Dominion’s review of

strategic alternatives as previously announced on March 27, 2017.

The Board of Directors of Dominion (the “Board”), after consultation

with financial and legal advisors, and based on the recommendation of a

special committee of the Board consisting of four independent directors,

has unanimously determined that the Arrangement is in the best interests

of the Company, approved the Arrangement and recommends that Dominion’s

shareholders vote in favour of the Arrangement. All directors of the

Company have entered into support agreements to vote their common shares

in support of the Arrangement.

“Dominion Diamond has an excellent collection of mining assets and a

talented and experienced management team and workforce,” said Lawrence

R. Simkins, President of Washington. “We are excited to work with their

team to extend the mine life of the Ekati mine and continue partnering

with Rio Tinto in the operation of the Diavik mine, while maintaining

long-term employment for Dominion employees. The Washington Companies

has a long track record of building businesses throughout North America,

significant experience in mining as well as operating its investments in

Canada, and a decades-long investment horizon. We share a commitment to

providing long-term benefits to all Dominion stakeholders and to the

Northwest Territories and its local communities.”

“The Washington offer delivers compelling and immediate value to

Dominion shareholders at an attractive premium that recognizes the

intrinsic value of Dominion and provides shareholders certainty through

an all-cash offer,” said Jim Gowans, Chair of the Board of Dominion

Diamond Corporation. “This offer is the result of a robust strategic

review process and the Board unanimously agrees that this offer

represents the best option available to Dominion shareholders, and

recommends that shareholders vote in favour of this transaction.”

Added Gowans, “Dominion also believes this transaction is an excellent

outcome for the company’s stakeholders, including employees, community

members and the Northwest Territories. The transaction allows the

operation to take the next steps in mine development and ensures mining

and its associated benefits continue in the North for decades to come.”

“The Washington Companies’ commitments to safety, operational

excellence, innovation and world-class management teams position us

favourably for long-term success at the Ekati and Diavik mines for the

benefit of all Dominion Diamond stakeholders,” added Dennis Washington,

Founder of The Washington Companies. “I look forward to the next chapter

of continuing to build and support successful, safe business operations

in the Northwest Territories.”

Benefits to Canada

Washington will be a responsible, long-term operator and builder of

Dominion’s world-class assets, and plans to extend the mine life of

Ekati for decades, consistent with the current development plan.

As part of this acquisition, Washington plans to:

  • Operate Dominion as a standalone business as Washington does with its

    other successful operating companies;

  • Appoint a new CEO based in Canada to the Dominion management team;

  • Keep Dominion’s headquarters in Canada and maintain a significantly

    Canadian management team;

  • Deploy capital to develop both the Jay and Fox Deep projects;

  • Make new investments in a reinvigorated greenfield exploration program;

  • Maintain a high level of environmental stewardship through all phases

    of its operations;

  • Provide ongoing and long-term employment for skilled, high-paying jobs

    at Dominion;

  • Maintain focus on the recruitment, training and employment of

    Indigenous people;

  • Honour the existing commitments to the Indigenous communities to

    ensure their interests are protected;

  • Continue with scholarship programs and heritage funds to assist with

    social, recreational, and community development programs;

  • Provide ongoing support for local suppliers and contractors, including

    Indigenous businesses; and

  • Continue to promote Dominion’s CanadaMark brand for its ethically

    sourced and premium Canadian diamonds.

Arrangement Agreement

The Arrangement Agreement is subject to customary non-solicitation

provisions, including Dominion’s right to consider and accept superior

proposals. In the event of a superior proposal, Washington will have a

five business day right to match the superior proposal. If the

Arrangement is not completed as a result of a superior proposal, the

Company will be required to pay Washington a termination fee equal to

US$43.9 million (or approximately 3.75 percent of the equity value).

The closing of the Arrangement is subject to the approval of at least

two-thirds of the votes cast at a special meeting of Dominion

shareholders to be called to consider the Arrangement, the Company

having a minimum cash balance of US$150 million if closing is on or

before November 30, 2017, or US$200 million if closing is after November

30, 2017, and certain other customary closing conditions, including

court approval, approval from the Minister of Innovation under the

Investment Canada Act and the Commissioner of Competition under the

Competition Act, and the absence of any material adverse effect with

respect to the Company. In connection with the transaction, Dominion

will suspend the declaration and payment of dividends on Dominion’s

shares and has terminated its Normal Course Issuer Bid. The transaction

is expected to close in the fourth quarter of 2017.

To fund part of the consideration payable in connection with the

Arrangement, Washington has obtained fully committed debt financing led

by Credit Suisse with Citi, UBS Investment Bank and Natixis acting as

joint lead arrangers. The balance of the consideration will be funded

with an equity commitment from Washington and cash on Dominion’s balance


Should Washington be unable to complete the Arrangement due to a funding

failure, or in other limited circumstances, Washington will be required

to pay the Company a reverse termination fee equal to US$70.2 million

(or approximately 6.0 percent of the equity value).

Washington is highly committed to strong environmental stewardship,

reclamation obligations and safety culture, as is Dominion. As part of

the transaction, the strong environmental bonding obligations of

Dominion will remain unchanged.

Further information regarding the transaction will be included in the

Company’s management information circular to be mailed to Dominion’s

shareholders in advance of the special meeting of Dominion shareholders,

which is expected to be held in September 2017, and in Dominion’s

material change report in respect of the announcement of the

transaction, each of which will be filed with the Canadian and U.S.

securities regulators and will be available on SEDAR at www.sedar.com

and EDGAR at www.sec.gov.

The Board has obtained a fairness opinion from each of TD Securities

Inc. and Morgan Stanley Canada Limited that, as of the date of the

opinions, and subject to the assumptions, limitations and qualifications

on which such opinions are based, the consideration to be received by

the Company’s shareholders pursuant to the Arrangement Agreement is

fair, from a financial point of view, to the Company’s shareholders.

Financial and Legal Advisors

BDT & Company, LLC is providing financial advice to Washington. Blake,

Cassels & Graydon LLP and Skadden, Arps, Slate, Meagher & Flom LLP are

acting as legal counsel to Washington.

TD Securities Inc. is acting as financial advisor to the Company,

Stikeman Elliott LLP is acting as legal advisor to the Company and

Kingsdale Advisors is acting as strategic advisor to the Company.

Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor

to the Special Committee and the Board of Directors of the Company.

Morgan Stanley Canada Limited is acting as financial advisor to the

Special Committee of the Board, and has provided a fairness opinion to

the Board on a fixed fee basis.

Forward-Looking Statements
This news release

includes forward-looking statements and information (collectively, the

“forward-looking statements”) including, but not limited to:

forward-looking statements pertaining to the purchase by Washington of

all the issued and outstanding common shares of Dominion; the expected

benefits of the transaction, including the expected benefits to

shareholders, customers, employees and other stakeholders as well as

future financial and operating results; the anticipated timing for the

special meeting of Dominion shareholders and closing of the transaction;

the satisfaction of closing conditions including, without limitation (i)

certain regulatory approvals; (ii) required Dominion shareholder

approval; (iii) necessary court approval in connection with the plan of

arrangement, (iv) certain termination rights available to the parties

under the Arrangement Agreement; and (v) other closing conditions,

including, without limitation, the operation and performance of the

Dominion business in the ordinary course until closing of the

transaction, maintenance by Dominion of a minimum cash balance in the

amounts as specified in the Arrangement Agreement, and compliance by

Dominion with various covenants contained in the Arrangement Agreement,

all of which are subject to risks, uncertainties and assumptions. As a

consequence, actual results in the future may differ materially from any

expectation, conclusion, forecast or projection in such forward-looking

statements. Therefore, forward-looking statements should be considered

carefully and undue reliance should not be placed on them. Examples of

statements that constitute forward-looking information may be identified

by words such as “believe”, “expect”, “project”, “should”, “anticipate”,

“could”, “target”, “forecast”, “intend”, “plan”, “outlook”, “see”,

“set”, “pending”, and other similar terms. All forward-looking

statements are made pursuant to the safe harbour provisions of

applicable Canadian securities legislation. Forward-looking statements

are subject to risks, uncertainties and assumptions including, but not

limited to: the potential risk that the transaction will not be approved

by Dominion shareholders; failure to, in a timely manner, or at all,

obtain the necessary regulatory and court approvals for the transaction

or any transaction ancillary thereto; failure of the parties to

otherwise satisfy the conditions to complete the transaction; the

possibility that the Board of Directors of Dominion could receive an

acquisition proposal and approve a superior proposal; the effect of the

announcement of the transaction on Dominion’s strategic relationships,

operating results and business generally; significant transaction costs

or unknown liabilities; the risk of litigation that would prevent or

hinder the completion of the transaction; and other customary risks

associated with transactions of this nature. In addition, if the

transaction is not completed, and Dominion continues as an independent

entity, there are risks that the announcement of the transaction and the

dedication of substantial resources of Dominion to the completion of the

transaction could have an adverse impact on Dominion’s business and

strategic relationships, operating results and business generally. As a

consequence, actual results in the future may differ materially from any

forward-looking statement, forecast or projection, whether expressed or

implied. Therefore, forward-looking statements should be considered

carefully and undue reliance should not be placed on them. Please note

that forward-looking statements in this news release reflect

Management’s expectations as of the date hereof, and thus are subject to

change thereafter. The Company disclaims any intention or obligation to

update or revise any forward-looking statements, whether as a result of

new information, future events or otherwise, except as required by law.

Factors that could cause anticipated opportunities and actual results to

differ materially include, but are not limited to, matters referred to

above and those matters identified in the Risks and Uncertainties

section and elsewhere in the Company’s most recent annual MD&A and the

material change report that will be filed in respect of this

transaction, which are, or will be, available on the Company’s website

at www.ddcorp.ca

and on SEDAR at www.sedar.com

and EDGAR at www.sec.gov.

About Dominion Diamond Corporation

Diamond Corporation is a Canadian mining company and one of the world’s

largest producers and suppliers of premium rough diamond assortments to

the global market. The Company operates the Ekati Diamond Mine, in which

it owns a controlling interest, and owns 40% of the Diavik Diamond Mine,

both of which are located in the low political risk environment of the

Northwest Territories in Canada. It also has world-class sorting and

selling operations in Canada, Belgium and India.

About The Washington Companies
The Washington

Companies, founded by industrialist and entrepreneur Dennis R.

Washington, are privately held companies active in the core industries

of mining, rail and marine transportation, aviation, environmental

remediation and restoration services, and heavy equipment sales and

service. The companies are headquartered throughout Montana, the Pacific

Northwest and western Canada and conduct business internationally.

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