Canadian miner Dominion Diamond Corp. received a $1.1 billion bid from a privately held conglomerate in Montana but the two sides are at a negotiating impasse, setting the stage for a public takeover fight.

The Washington Cos., a group of North American mining, railroad and transportation assets founded by billionaire Dennis Washington, approached Dominion in late February with an offer of $13.50 per share, according to people familiar with the matter.