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Oppenheimers exit De Beers

Published : Dec 02, 2011 00:00 IST

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MINING giant Anglo American has taken a controlling stake in De Beers, the biggest diamond distributor in the world, spending 3.2 billion on the 40 per cent holding owned by South Africa's Oppenheimer family.

Anglo, which already speaks for 45 per cent of De Beers, will emerge with 85 per cent once the deal is completed in a move that will give it a leading role in the global diamond market.

Although De Beers has endured a difficult recession with sales and profits plummeting, trading has recovered with strong demand from emerging markets such as India and China.

Prices have jumped recently by 40 per cent since the start of the year, propelled by the growing popularity of diamond-encrusted rings among Chinese brides.

The government of Botswana owns the outstanding 15 per cent of De Beers but has the option to increase its stake to 25 per cent, which could cut Anglo's stake to 75 per cent.

De Beers was established in South Africa in 1880 by Cecil Rhodes, the English-born politician and businessman who went on to found Rhodesia, renamed Zimbabwe in 1979. The company's name is synonymous with diamonds and its advertising slogans have included the ubiquitous diamonds are forever.

Analysts suggested that the Oppenheimers are selling because there is no clear successor to Nicky Oppenheimer, chairman of De Beers, who is in his sixties.

Archie Kane at Liberum Capital said: There is no obvious family member coming through the ranks to take management control. The Oppenheimers have held sway at De Beers since the late 1920s.

Traders speculated that Anglo could one day spin off De Beers into a separately listed company, something that Anglo shareholders would welcome.

Several institutional investors have complained that the value of Anglo's holding in De Beers is not reflected fully in its share price. At the price Anglo is paying for the De Beers stake, the diamond company is valued at nearly 8 billion.

Anglo and De Beers have always played down or denied stories that a deal was in the offing, but on November 4 chief executive Cynthia Carroll admitted it was an acquisition she had long coveted. She said: This transaction is a unique opportunity for Anglo American to consolidate control of the world's leading diamond company.

Nicky Oppenheimer, representing the family interests, said: This has been a momentous and difficult decision as my family has been in the diamond industry for more than 100 years and part of De Beers for more than 80 years. After careful and deliberate consideration of the offer, and what is in the best interests of the family, we unanimously agreed to accept Anglo American's offer.

The Financial Times reported that when Cynthia Carroll was asked why she had not bid for the stake when prices were lower, she replied: Where there is a buyer, there has got to be a seller that's the bottom line.

Richard WachmanGuardian News & Media 2011

(This story was published in the print edition of Frontline magazine dated Dec 02, 2011.)

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