De Beers, once a crown jewel in Anglo American, will in the next two weeks unveil a refreshed strategy after falling out of favour with Anglo’s top brass.
Anglo on Tuesday said it would listen to offers from suitors looking to buy De Beers as part of its biggest shake-up in a generation. The London- and Johannesburg-listed group in February impaired $1.6bn in De Beers after a plunge in prices in 2023 and a slow recovery.
Botswana President Mokgweetsi Masisi has already said the country would defend its interests in any potential sale of De Beers, which at one point accounted for more than 80% of the world’s diamond supply.
Al Cook, the CEO of De Beers, said Anglo’s announcement “opens new possibilities under new ownership”. The company would focus on delivering value to its partners in Botswana, SA, Namibia, Canada, Angola and other jurisdictions.
“In particular, we look forward to finalising our transformational agreement with the government of the Republic of Botswana, who hold a 15% ownership interest in De Beers,” Cook said.
“Later this month, we will present the new strategy for De Beers. Diamonds remain some of the most desired products around the world, and I am excited by the opportunity we have to bring their magic to a new generation. With the ongoing recovery in rough diamond demand and such a positive outlook for the sector, I feel very confident in our future.”
Reuters reported on Tuesday that Anglo would also consider an initial public offering for De Beers, preferably in London.
The 136-year-old De Beers employs more than 20,000 people across the diamond pipeline and is the world’s largest diamond producer by value. Anglo in 2012 announced the completion of its acquisition of a 40% shareholding in De Beers from the Oppenheimer family. The $5.2bn deal that saw the group increase its shareholding in De Beers to 85%.
De Beers recently came under extreme pressure as young consumers drive a sales boom in lab-grown diamonds. Diamond miners are also grappling with an oversupply.
De Beers, Anglo American Platinum (Amplats) and Anglo’s nickel and steel making businesses have been deemed noncore following the group’s portfolio review — a process that was speeded up after BHP made two bids to buy the group.
Chantal Marx, head of investment research at FNB Wealth and Investments, said the sale of De Beers would be difficult. It would be “more complicated as it can be argued that we are currently at a cyclical low point in terms of diamond pricing, with the threat of lab-grown diamonds replacing demand also a longer-term consideration.
“We like the idea of removing PGMs and diamonds from the structure. There is execution risk in the breaking up of the business, however, as well as major changes that will have to occur sooner than the company may have planned for.
“The outcome could be that in a more near-sighted attempt to push value creation to rebuff the BHP advance, management ends up destroying value instead.”
London-based specialist advisory firm MKP Advisors said the plan announced by Anglo was unlikely to halt BHP’s pursuit of the group.
Tyler Tebbs, MD of MKP Advisors, said Anglo’s mooted demerger of platinum, via the spin-off of its stake in Amplats, was already part of BHP’s plan.
He said speculation had been rife that Anglo had been looking for buyers for De Beers without success.
“It would be fair for BHP to point out that really the only ‘new’ elements today are the moves in nickel, [which are] broadly irrelevant as it only represents about 1% of Anglo’s valuation, and steelmaking coal, which is about 12%,” Tebbs said.
“There will likely be interested parties for the latter business, although the likes of Rio, BHP and Glencore would all have some antitrust concerns given Anglo’s mines are in Queensland. There would perhaps be some value leakage here given the nature of the likely buyer, maybe something like an Indian steelmaker.”
Tebbs added that BHP’s argument was likely to be that the plan announced by Anglo lacks real detail, and the question was how long it would take for Anglo to implement the break-up and whether the market would give it the benefit of the doubt that this could be done in a quick and efficient manner.
“The concern with the self-help plan announced on Tuesday will be that it is too little too late, there is no timescale attached to most of the plans and it has been clear to most that many of the potential disposals across the portfolio are simply tough to execute as there are no interested parties,” Tebbs said.
“Absent crystallising value by selling a stake in the copper business directly, the argument will probably be that Anglo couldn’t have done a lot more than we see today in terms of self-help, but it won’t come as any real surprise if the market sees Anglo’s announcement as too little, too late.”
Asief Mohamed, chief investment officer of Aeon Investment Management, said: “It is unfortunate that an offer from BHP has got the Anglo board to now extract value and efficiencies. Shareholders have to decide on a firm bid from BHP or possibly a Glencore or Rio Tinto offer or staying with the Anglo proposal. We do need a few days to review all possible offers.”
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