Anglo American (AGL) has agreed to acquire the Oppenheimer family's 40% interest in De Beers for US$5.1 billion. This will take Anglo American's current 45% shareholding in the world's leading diamond company to up to 85%.
On the JSE, Anglo's share price jumped R6.65, or 2.25%, in early trade to R302.40.
Anglo American said on Friday it has entered into an agreement with CHL and Centhold International Limited (CIL), together representing the Oppenheimer family interests (CHL Group), to acquire their 40% interest in DB Investments and De Beers sa for a total cash consideration of US$5.1 billion, subject to adjustment as provided for in the agreement.
Under the terms of the existing shareholders' agreement between Anglo American, CHL and the Botswana Government (GRB), the GRB has pre-emption rights in respect of the CHL Group's interest in De Beers, enabling it to participate in the transaction and to increase its interest in De Beers, on a pro rata basis, to up to 25%.
In the event that the GRB exercises its pre-emption rights in full, Anglo American, under the proposed transaction, would acquire an incremental 30% interest in De Beers, taking its total interest to 75%, and the consideration payable by Anglo American to the CHL Group would be reduced proportionately.
Anglo American has a deep knowledge and understanding of De Beers and an appreciation for the unique nature of diamonds, having been the company's largest shareholder since De Beers became a private company in 2001 and as a longstanding shareholder in De Beers prior to that.
De Beers' geographically diverse portfolio comprises large scale, low cost mining assets with proven distribution, sales and marketing capabilities and further potential from its leading pipeline of greenfield and brownfield projects and an expanding consumer-facing footprint. Anglo American is well positioned to enhance the value of De Beers through its expertise and scale in such areas as technical, supply chain and financial management functions as part of a simplified and more integrated ownership structure.
Cynthia Carroll, Chief Executive of Anglo American, said: “This transaction is a unique opportunity for Anglo American to consolidate control of the world's leading diamond company - De Beers. Today's announcement marks our commitment to an industry with highly attractive long term supply and demand fundamentals. Underpinned by the security of supply offered by a new 10-year sales agreement with our partner, the Government of the Republic of Botswana, this forms a compelling proposition. De Beers' management team has led the business successfully through the financial crisis and into a stable position and it is now well placed for the future, with improving performance throughout 2011.”
“I believe that the benefits brought by Anglo American's scale, technical, operational and exploration expertise and financial resources, combined with the unquestionable leadership of De Beers' business and iconic brand will enable De Beers to enhance its position across the diamond pipeline and capture the potential presented by a rapidly evolving diamond market.”
Nicky Oppenheimer, representing the Oppenheimer 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 over 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.”
“Anglo American is the natural home for our stake as they have been major shareholders in De Beers since 1926 and have a deep knowledge of the diamond business. I am certain that Anglo American will provide strong support to Philippe Mellier and the De Beers management team.”
Sir John Parker, Chairman of Anglo American, added: “The purchase of an incremental interest in De Beers is fully aligned with the Board's strategic priorities. The value created in De Beers and the diamond industry by the Oppenheimer family over the past century has been a remarkable achievement. We look forward to increasing our involvement in the business and building strong links and relationships with De Beers' Sightholders and partners.”
The transaction is expected to be accretive to underlying earnings before depreciation and amortisation on fair value adjustments in the year of acquisition. The transaction does not alter the existing arrangements for the management of De Beers, including Nicky Oppenheimer's position as chairman, prior to completion. Mellier will continue as CEO of De Beers.
In view of the fact that CHL and CIL are ultimately controlled through intermediary companies by trusts of which Oppenheimer is a potential discretionary beneficiary and Oppenheimer has been a director of Anglo American within the last 12 months, the proposed acquisition is categorised as a related party transaction under the terms of the Listing Rules and therefore requires Anglo American shareholder approval.
A circular to Anglo American shareholders convening a General Meeting of Anglo American shareholders for the purposes of seeking such approval will be sent to shareholders in due course. The transaction is also subject to regulatory and government approvals and required third party consents and is expected to close in the second half of 2012. - I-Net Bridge