Sunday, December 19, 2010

Anglo American mulls plan to control De Beers

ANGLO AMERICAN is weighing up a multi-billion-dollar plan to take control of De Beers, the world's largest diamond company.

The plan involves buying out South Africa's Oppenheimer family.

Big institutional shareholders in Anglo, a mining giant listed in London and South Africa, are pushing its management to "tidy up" its investment in De Beers. Anglo owns 40 per cent, the government of Botswana 15 per cent and the Oppenheimers 45 per cent.

Financial sources said that while a spin-off of De Beers had been considered, it was more likely that Anglo would buy out the family and make De Beers part of its core operations.

The Oppenheimer stake is difficult to value, but it could cost Anglo at least ₤2 billion ($3.14bn).

"Shareholders aren't happy with the minority investment. They want clarity either way, and the view of the directors is a positive one: that they would be interested in taking control," one banking source said.

If the Anglo board goes ahead with the plan, it would sever a long association between the Oppenheimer family and the two companies.

De Beers was founded in 1880 by Cecil Rhodes, the English-born mining magnate and politician who founded Rhodesia, now Zimbabwe. Rhodes and De Beers made millions from South Africa's diamond mines.

Sir Ernest Oppenheimer set up Anglo American in 1917 with backing from JP Morgan, the American tycoon, and seized control of De Beers in 1927. Anglo later became a quoted company and one of the world's biggest players in coal, copper and platinum.

De Beers has stayed private, and is managed by the Oppenheimer family. Nicky Oppenheimer, De Beers' chairman and a director of Anglo, is Sir Ernest's grandson.

The Oppenheimers, whose wealth is estimated at about ₤3bn, are long-term investors in Anglo. However, last week the family sold shares in the miner, taking their stake below 2 per cent for the first time.

De Beers had a tough recession as consumers shied away from luxury goods. Last year it was forced to ask shareholders to stump up $US1bn ($1.01bn) to refinance the group.

Trading bounced back this year. In July the company said first-half profits were $US255m. It also said Gareth Penny, the long-serving chief executive, would step down.

Putting a value on the Oppenheimers' stake is difficult. The family shares are held through a group called Central Holdings, which owns part of De Beers SA, registered in Luxembourg.

Bankers say that based on recent profits and the group's leading position in world diamonds, the stake may be worth between $US3bn and $US5bn.

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