Oppenheimers sell stake in De Beers

2011-11-05 09:39

The sudden decision by the Oppenheimer family to sell its 40% stake in De Beers to diversified global miner Anglo American for $5.1 billion (R40 billion) has raised questions about the impact of nationalisation talk on investment.

Eskom chief economist Mandla Maleka said: “Anglo American has for years been unsuccessful in its attempt to buy the stake from the Oppenheimers.

One wonders whether the Oppenheimers are selling the stake due to commercial reasons or if there was pressure coming from certain quarters, like the nationalisation debate.”

The Oppenheimers loosened their grip on De Beers after an almost 80-year involvement with the company. The deal will increase Anglo’s stake in De Beers from the current 45% to 85%, although the Botswana government – which owns the remaining 15% – could decide to take part in the transaction and increase its own stake
in De Beers to 25% by way of pre-emption rights.

A statement issued by Anglo reads: “In the event that (Botswana) exercises its pre-emption rights in full, Anglo American would acquire an incremental 30% interest in De Beers, taking its total interest to 75%, and the consideration payable by Anglo American would be reduced proportionately.”

De Beers was established by British imperialist Cecil John Rhodes in 1888, but Ernest Oppenheimer, a German-Jewish immigrant who formed Anglo with American financier JP Morgan in 1917, took control in 1927.

The company was later run by his son, Harry, who handed over to grandson Nicky. Between the three, they built De Beers into a global diamond empire that currently sells about a third of the world’s rough diamonds.

Nicky Oppenheimer, the De Beers chairperson who also represents the Oppenheimer family interests, said the decision to sell was tough.

“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,” he said.

“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.”

Maleka said the sale should have been scrutinised by competition authorities because it would result in big industry players further monopolising mining.

Frans Baleni, the general secretary of the National Union of Mineworkers (NUM), said the union would try to schedule a meeting with Nicky Oppenheimer to find out why his family was pulling out.

“We would like to have some discussion with Nicky to understand why he is disinvesting in mining because this sends a signal of lack of confidence in the local mining industry. We also don’t know what he is going to do with the huge (sum of) cash from the sale of the Oppenheimer stake.

“He has played a big role in developing mining in South Africa, but we also think he should have done more from a social responsibility point of view. Over the past few years, De Beers has been retrenching workers,” said Baleni.

The Oppenheimers sold about $102 million of Anglo shares in December last year, leaving their stake in the company at about 1.9%. In 2006, they sold 1.13% of Anglo to billionaire Larry Yung’s China Vision Resources for about $803 million.

The family has “no intention at this stage” of further reducing its holding, according to James Teeger, the managing director of E Oppenheimer & Son Group.

Baleni said the NUM would hold talks with Anglo, the new controlling shareholder, to understand the deal’s impact on labour. “We will sit down with Anglo to discuss the implications for workers following the change of control in De Beers,” he said.

Industrial Development Corporation chief economist Lumkile Mondi said if the Oppenheimers repatriated the cash into South Africa and converted it into rands, this could strengthen the local currency.

“But if the money comes in dribs and drabs, it will not have any impact on the rand,” he said. – Additional reporting by Bloomberg

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