Geminder's Strategic Divestiture in Asia: Capital Reallocation and Market Implications in the Gem and Luxury Sector

Raphael Geminder, the billionaire founder of Pact Group, is navigating a complex web of capital allocation decisions as he seeks to delist his controlling stake in the Australian packaging giant from the ASX. While the immediate focus remains on Pact Group's delisting, the broader implications for Geminder's Asia-based gem/luxury operations-and their potential divestiture-highlight a strategic pivot in response to sector-specific challenges.

Financial Performance and Sector Headwinds

Geminder Asia's gem/luxury business has faced a stark downturn in 2025, with revenue plummeting 42% year-on-year to US$45.4 million in the first half of the year. This decline stems from a combination of lower diamond prices, reduced carat volumes, and geopolitical uncertainties, including U.S. tariff pressures, according to Gem Diamonds' Half-Year Report 2025. The average price per carat dropped to US$1,008 from US$1,366 in H1 2024, while underlying EBITDA turned negative at US$2.6 million, and net debt surged to US$28.2 million, the report shows. These figures underscore the sector's vulnerability to macroeconomic volatility, a trend echoed in broader luxury market forecasts.

According to McKinsey's State of luxury goods in 2025, the global luxury sector is projected to grow at a muted 1–3% annually, with gem/luxury brands particularly exposed to shifting consumer preferences and inflationary pressures. J.P. Morgan Research notes that while categories like watches and jewelry remain resilient, the broader market is grappling with "structural headwinds" that could force strategic realignments, according to its luxury market outlook.

Strategic Divestiture as a Capital Reallocation Tool

Geminder's potential divestiture of Asia-based gem/luxury assets aligns with a broader trend of companies exiting non-core or underperforming segments to preserve liquidity. Pact Group itself has already engaged advisors to review the sale of its Asian packaging and closures business, a move framed as a response to "operational and financial pressures," according to an Azzet report. For Geminder, this strategy mirrors his approach to delisting Pact Group, where he cited the need to reduce costs and streamline operations, the Australian Financial Review reported.

The logic of such divestitures is well-documented. As Deloitte's 2024 Global Divestiture Survey highlights, companies increasingly view strategic exits as a means to "unlock shareholder value and refocus on core competencies." In Geminder's case, exiting the gem/luxury sector could free capital for reinvestment in Pact's sustainability initiatives-such as its 2025 target to eliminate non-recyclable packaging-or to address debt burdens in other ventures, including Pro-Pac Packaging, as covered in an AFR Pro-Pac story.

Market Implications and Investor Sentiment

The potential sale of Geminder's Asia gem/luxury assets carries significant market implications. For one, it could signal a broader shift in private capital allocation strategies. McKinsey's Global Private Markets Report 2025 notes that investors are increasingly prioritizing sectors with "defensive characteristics," such as sustainability-driven manufacturing, over cyclical industries like luxury goods. Geminder's pivot toward Pact's green packaging goals aligns with this trend, potentially enhancing long-term shareholder value.

However, the move is not without controversy. Pact Group's delisting proposal-offering 90 cents per share, below its recent trading price-has drawn sharp criticism from minority shareholders, who argue it undervalues the company, according to the Australian Financial Review. Similar concerns could arise if Geminder's gem/luxury divestiture is perceived as a forced exit rather than a strategic rebalancing.

Future Outlook and Sector Trends

Looking ahead, Geminder's success in restructuring his portfolio will hinge on two factors: the execution of cost-saving measures in the gem/luxury sector and the ability to capitalize on Pact Group's post-delisting flexibility. The latter, if approved, would allow Geminder to bypass ASX compliance costs and pursue aggressive capital expenditures, such as modernizing Pact's recycling infrastructure, as reported by the Australian Financial Review.

Meanwhile, the gem/luxury sector's outlook remains uncertain. While high-value diamond sales-such as a 67.50-carat white diamond fetching US$26,441 per carat in Q1 2025-offer glimpses of resilience, Gem Diamonds' Half-Year Report 2025 suggests the broader market's dependence on macroeconomic stability will keep divestitures a key theme in 2025.

Conclusion

Geminder's potential divestiture of Asia-based gem/luxury assets reflects a pragmatic response to sector-specific challenges and evolving capital allocation priorities. By exiting underperforming segments and focusing on core operations, he aims to align his empire with long-term growth drivers-sustainability, operational efficiency, and strategic liquidity. Yet, the path forward will require navigating shareholder resistance and macroeconomic headwinds, both of which could shape the broader market's perception of his strategy.