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(NYTIMES 2001) $17.6 Billion Deal to Make De Beers Private Company

$17.6 Billion Deal to Make De Beers Private Company
By ALAN COWELL with RACHEL L. SWARNS
Published: February 16, 2001

The Oppenheimer family, which has controlled much of the world diamond trade for more than 70 years, has tightened its already powerful grip with a $17.6 billion agreement to turn De Beers into a private company in partnership with its sister corporation, Anglo American, and other close allies.

The deal, announced today in London and Johannesburg, would transform a cumbersome and often opaque relationship between Anglo American, the world's largest mining company, and De Beers, the dominant diamond miner and trader, in which each owned one-third of the other's stock.

The deal offers Anglo American, whose stock is listed in London, an escape from the cross-holdings, which have depressed its stock price and which would otherwise soon be subjected to penalties under new exchange rules. In return, Anglo American would financially support the creation of a new private De Beers, delisted from stock exchanges in South Africa and Switzerland, where components of it now trade.

The new De Beers would still be run by Nicky Oppenheimer, the grandson of Sir Ernest Oppenheimer, the founder of Anglo American. The Oppenheimers have controlled the two intertwined businesses since the 1920's. ''This has to be the biggest change since those days,'' said Gary Ralfe, De Beers's managing director, in a telephone interview.
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Particularly during South Africa's apartheid era, Anglo American and De Beers were often seen by outsiders as a single secretive giant with a complex web of investments threaded through the whole economy. Since Anglo American moved its primary listing from Johannesburg to London in 1999, it has sought to establish a clearer corporate identity to satisfy investors. Nevertheless, the deal extends Anglo's powerful interest in De Beers, which controls about two-thirds of the world's trade in rough diamonds.

Under the agreement, De Beers stockholders would be bought out by a consortium to be called DB Investments, in which Anglo American and the Oppenheimer family would each have a 45 percent stake. The remaining 10 percent would belong to Debswana, a mining venture co-owned by De Beers and the government of Botswana, a major source of diamonds.

The deal values each De Beers linked unit -- which combines shares in the South African and Swiss-traded De Beers entities -- at $43.17. That price includes $14.40 in cash, 0.43 Anglo American share and the right to a $1 dividend payment.

Correction: February 19, 2001, Monday An article in World Business on Friday about an agreement to take the De Beers diamond business private misstated the change in its stock price. It rose on Thursday by 8.8 rand, to close at 328.4 rand ($41.67); the increase was not 880 rand.

Labels: ANGLO-AMERICAN, DEBEERS, DIAMONDS

posted by MrK @ 5:42 PM