De Beers To Go Private

February 2, 2001

De Beers To Go Private

A consortium made up of Anglo-American, the Oppenheimer family and Debswana (the joint diamond-mining venture owned by De Beers and the government of Botswana) is bidding to buy all shares of the De Beers group, De Beers announced yesterday. After the acquisition is final, De Beers would be privately held and delisted from public stock exchanges where it's traded. De Beers considers the buyout friendly.

The new private company would be owned 45% by Anglo American, 45% by the Oppenheimer family and 10% by Debswana. The Oppenheimer family, led by Sir Ernest Oppenheimer, founded Anglo American and De Beers. Nicky Oppenheimer, Sir Ernest's grandson, is the current chairman of De Beers. Anglo American is a natural resources group, whose stock has been entangled with De Beers since the 1930s. The new company would simplify their relationship – Anglo would own a straightforward amount of De Beers' stock and De Beers would no longer own Anglo American stock. This should increase Anglo's stock value, since the formerly complex relationship with De Beers was a negative for many shareholders.

Some analysts say the new arrangement will also further De Beers' ambition to be rid of its "persona non grata" status in the U.S., reports the Financial Times of London. According to unnamed sources, Anglo has been negotiating with the U.S. for months to resolve De Beers' antitrust issues, in anticipation of the consortium's buyout. Last year, Nicky Oppenheimer tried without success to resolve the matter.

Not only has De Beers been considered a near-monopoly by the U.S. because of its control of about 65% of worldwide diamond sales by value, it also must resolve a long-standing indictment by the U.S. relating to industrial diamonds. If Anglo can resolve these issues, De Beers could further its U.S. market ambitions, relating to its new joint venture with LVMH Moet Hennessey Louis Vuitton (see related article).

The move also signals a renewed endorsement of the value of diamonds, since Anglo American and the Oppenheimer family are enthusiastically buying De Beers shares. Debswana's involvement in the consortium is a tribute to its growing significance to De Beers as a huge source of its mined diamonds.

Diamond analyst Martin Rapaport speculated yesterday De Beers may be going private so it can restructure itself more and possibly spin off the Diamond Trading Co., De Beers' sales and marketing arm. This would help to remove its monopoly status with the U.S. and enhance the new De Beers/LVMH partnership. Rapaport also said De Beers could go public again and realize higher value for its shares now that its new strategic plan and branding initiative is in the works.

- by Peggy Jo Donahue