US Edition Last Thursday the latest chapter in the saga drew to a close when Tanzanite won overwhelming shareholder approval – of sorts – for resolutions to increase its authorised share capital and amend its byelaws, affording it more protection as a takeover target.
The concept of "overwhelming approval" is, in Tanzanite's case, subjective: most of the votes cast in favour of the resolutions were attached to nil-paid, unlisted "B shares" with temporary voting rights that expire this Friday. Those shares were issued by the company to one of its subsidiaries, Tanzanite Mining, after Gemfields embarked on its bid last year.Almost 80pc of votes were cast in support of each resolution ? well above the 50pc needed. But an analysis of the voting carried out by management at Gemfields shows that, stripping out the B shares, votes against the resolutions made up the majority.
It was, said Gemfields executive director Sean Gilbertson, "deplorable" that Tanzanite One directors chose to override their shareholders by using a temporary voting instrument of their own design.
"I imagine that there cannot be many cases in history where directors of a London-listed public company have forced a change of byelaws and an increase in share capital against the will of shareholders," he said.
Mr Gilbertson, son of Gemfields founder and former BHP Billiton chief executive Brian Gilbertson, said it was "a sad day for corporate governance and shareholder rights".
He and his company, though, hardly emerge from the Tanzanite fight as champions of shareholder rights themselves.
Rewind to last October and Gemfields, which a month earlier had announced it was contemplating a bid for the entire issued share capital in Tanzanite, valuing it at about £33m or 45p a share, decided against formalising an offer. Instead, it launched a "first-come, first-served" tender offer to buy up to 57pc of Tanzanite shares, paying 42.75p a share. It already owned 18.5pc.
The offer was, say people close to Tanzanite's board, an underhanded attempt to take control of the company that failed to treat all Tanzanite shareholders equally.
It prompted Tanzanite to issue the B shares as a defensive mechanism, "to protect all shareholders". In turn, Gemfields aborted its tender offer and a predictable war of words ensued, one that continued up to and beyond last week's special meeting of Tanzanite shareholders.
For anybody well versed in UK takeover regulations, the obvious question is "How?" How is it possible that Gemfields could position itself to build a controlling stake in Tanzanite without making a bid for the entire company ? and how is it possible that Tanzanite's boardroom could effectively issue itself short-term shareholder voting rights to ward off the bid?
The answer lies in Tanzanite's foreign domicile. As a company incorporated in Bermuda, it is not subject to UK rules, such as the Takeover Panel requirement that an investor must make an offer for all the share capital in a company after reaching the 30pc threshold.
Tanzenite has modelled one of its new byelaws on that exact rule, ensuring a would-be raider, such as Gemfields, cannot build a controlling stake without making a full offer.
That's likely to come as little comfort, however, for institutional and retail shareholders in it and various other London-listed companies incorporated abroad.
In the same special meeting last week, Tanzanite management used its voting majority to increase its authorised share capital, effectively leaving it where it started: able to again issue nil-paid B shares that give it a majority of shareholder votes.
Tanzanite shareholders, while they no longer face being minority investors in a company taken over by a third party, now know that their board is able and willing to give itself a majority of shareholder votes if and when it sees fit.
As the dust settles from the Gemfields and Tanzenite duel then, while the latter emerges intact, both companies have sustained damage to their reputations. But arguably the biggest loser is the growth market, which is already fighting to maintain suitable liquidity levels and investors' trust in boardrooms.
The question for the London Stock Exchange is whether to regulate further or hope that the gemstone miners' melee is a one-off.
It's an unenviable bind: companies on the growth market are already struggling with the burden of red tape. But the alternative ? leave investors to shoulder the potential burden at a time when the market is crying out for more liquidity ? is hardly more palatable.
Dawson chairman rallies shareholder support
Michael Hartley, the chairman of Aim-listed textile business Dawson International, has written to shareholders calling for their support as he fights a campaign by activist investors to have him removed from office.
Mr Hartley has told shareholders that Leeds Group, which owns 28.8pc of Dawson and has called for his removal as a director, appears to have "a plan to achieve creeping control".
Leeds Group last year secured enough shareholder support at Dawson's annual meeting for two nominees, David Bolton and Jan Holmstrom, to be appointed to the board.
The activist investor is calling for David Bolton to serve as interim chairman at Dawson, a Scottish company that is one of the biggest global manufacturers of cashmere products. Mr Hartley would be removed immediately under a resolution put forward by Leeds Group for Dawson's 2009 annual meeting, scheduled for Friday, May 8.
In his letter to shareholders, Mr Hartley said the proposal was "both unjustified and a blatant attempt to disenfranchise the majority of shareholders by frustrating the appointment" of a suitably qualified, experienced and independent successor. Leeds Group representatives could not be reached for comment.
Mr Hartley, formerly a director of then FTSE 250 company Coats Viyella, indicated to the Dawsons board late last year that he was ready to retire from the post and would step down when a successor was found.
In a statement to shareholders last week, the other three Dawson directors, David Cooper, Andrew Bartmess and Stephen Russell, said the board had unanimously selected a preferred candidate for chairman.
But Leeds Group had advised Dawson in February that it was "inappropriate to make a long term appointment" on a strategic basis given that the cashmere company was in the process of selling one of its businesses and potentially selling another. It called for Mr Hartley to retire as intended and Mr Bolton to be appointed on an interim basis.
Mr Hartley said in his letter to shareholders that it was "in the interests of the company that I remain as chairman" until an independent successor could be found. He defended his performance in the role, saying Dawson was heavily loss-making with debt approaching £25m when he joined the board, and was now profitable, more efficiently organised and held almost £6m in cash.