Shareholders OK De Beers buyout

De Beers’ shareholders approved an $18.7 billion buyout of the South African diamond giant that produces almost half the world’s annual output of the gems, the Associated Press (AP) reported.

The buyout by a group that includes mining company Anglo American, the Oppenheimer family and Botswana’s Debswana diamond company would mark the end of an era as a publicly traded company for De Beers, which often angered governments with its control of diamond prices worldwide.

 

The deal still requires final High Court approval in South Africa, but Reserve Bank Governor Tito Mboweni described the buyout as a “wonderful opportunity for South Africa,” the AP reported.

The company, which has been listed on the Johannesburg Stock Exchange since 1893, expects to be delisted on June 1 and become a private company.

 

De Beers produces more than 30 million carats of diamonds annually-almost half of the world production — from mines in South Africa, Namibia, Botswana and Tanzania.

Shareholders initially balked at an original $17.1 billion offer from the consortium. But the group won support when it sweetened the offer to $15.35 in cash and 0.45 of an Anglo American share for each De Beers share held.

 

Although a small group of dissident shareholders said the consortium failed to present a full range of alternative options, about 95% of the shareholders approved the offer. At least 75% of the votes were needed for approval.

 

De Beers closed down 2.2% Friday at 363 rands ($45.75) a share while Anglo-American fell 3.2% to 135.4 rands ($17.06).

 

Shareholder approval also bolstered the rand, which has slipped about 7% since the beginning of the year, as dealers saw the deal as a boost to the South African economy. At the end of business Friday, the rand had improved by four cents to 7.93 to the dollar.

 

The deal is expected to bring $3.5 billion into the country in exchange for the shares being sold by South Africans who owned De Beers stock.

 

Anglo American was founded by De Beer’s chairman Nicky Oppenheimer’s grandfather, Ernest, who also seized control of De Beers, which was founded by Cecil Rhodes.

 

“Diamonds have always been the Oppenheimer’s first love,” Nicky Oppenheimer said after the vote, the AP reported.

 

Ernest Oppenheimer’s son, Harry, is credited with creating massive demand for diamonds by marketing the gems as the ultimate gift of love-an advertising campaign that culminated with the famous “A Diamond is Forever” slogan.

 

Under Harry Oppenheimer, De Beers became a powerful cartel, controlling the worldwide price of diamonds by signing exclusive contracts with most of the world’s diamond mines and stockpiling the gems in times of great supply.

 

The United States fumed when the cartel, fearing a glut in the market, refused to fill its massive orders for industrial diamonds during World War II. The U.S. Department of Justice also has investigated the company’s anticompetitive practices and barred it from directly conducting business in the United States.

 

Anglo American currently holds 32% of the stock in De Beers, the Oppenheimers hold 2% and Debswana, a joint venture between De Beers and the Botswana government, holds 5%.

 

After the buyout, Anglo will own 45% of the company, the Oppenheimers 45% and Debswana 10%.

Anglo American is a major South African mining group with interests in gold, platinum, coal, base and strategic metals, and forestry.