De Beers' Bid to Go Private Faces Stiff Opposition

April 23, 2001

De Beers' Bid to Go Private Faces Stiff Opposition

Two U.S. funds that hold just under10% of De Beers' shares, say they will oppose a consortium's bid to take De Beers private, reports the Financial Times of London. Shareholders in South Africa also oppose the deal. The combined shareholder opposition is enough to kill the bid, which must acquire 75% approval by minority shareholders to win approval.

The consortium – which includes the Oppenheimer family, Anglo American and the government of Botswana ( see "De Beers To Go Private" and "De Beers Investments Offers $43 Per Share to De Beers Stockholders") – has just a few days to decide whether to sweeten its offer in order to give shareholders time to file proxy votes before the May 4 shareholders' meeting. The two U.S. fund managers – Brandes Investment Partners of San Diego, CA, and Southeastern Asset Management of Memphis, TN – say simply "the transaction price is not adequate."

The De Beers consortium has said repeatedly it will not raise its offer from the approximate $41 per share that's now on the table. Analysts believe De Beers may still hold firm, given the weakness in the U.S. economy, which is affecting diamond sales, as well as a new European Commission investigation into a De Beers/LVMH branding partnership (see related article). Both factors could worry minority investors enough to back down, analysts believe. On the other hand, De Beers could decide to raise the offer just slightly to mollify the opposition, and this might be enough to close the deal, analysts speculate.

Tony Trahar, chief executive of Anglo American, told Dow Jones Newswires Monday he remains confident the consortium could still get 75% of the minority shareholder votes to win its bid. De Beers had not commented at press time. On the South African stock exchange, De Beers shares fell 2.2% by midday Monday over concern the plan to take the company private might fail.

- by Peggy Jo Donahue