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Oppenheimers plan De Beers buyout
By George Trefgarne, Financial Correspondent
THE restructuring of the De Beers diamond empire gathered pace yesterday when
a consortium backed by the Oppenheimer family announced a potential offer to
buy out other shareholders, valuing the company at $16 billion (�11
billion).The consortium, also backed by sister company Anglo American, is
offering about $40 per De Beers linked unit. That is a 25pc premium to the
closing price on Wednesday and the shares immediately jumped $6.50 to $38.50
on Nasdaq, where most are traded.The move is seen as increasing the
Oppenheimer family's control over the company, which was founded by the
explorer Cecil Rhodes in the 1880s. The Oppenheimers built up their stake
during the 1930s depression. The consortium currently speaks for about 40pc
of De Beers shares and is 45pc-owned by Anglo, 45pc by the Oppenheimer
family, and 10pc by the government of Botswana. It is expected to offer about
$17 in cash and around 0.3 Anglo for each De Beers linked unit.If the offer
goes ahead, the Oppenheimers' combined stake in both De Beers and Anglo is
likely to be worth about $9.2 billion (�6.2 billion). However, it is seen as
a step towards answering their critics. In recent years, De Beers shares have
been depressed as a result of the family's complex grip on the company. They
are believed to own about 8pc of both De Beers and Anglo, and in a series of
protective cross-holdings De Beers also owns 35pc of Anglo and Anglo owns
32.4pc of De Beers.When Anglo moved its main listing from Johannesburg to
London three years ago, investors demanded the family unlock the
cross-holdings and move De Beers, too. Roger Chaplin, an analyst at brokers
Canaccord, said this was now effectively being achieved: "This increases the
Oppenheimer control over De Beers as they have good relations with the
government of Botswana," he said, "but it unlocks the cross-holding."He
added: "It is also good for Anglo shareholders. I reckon Anglo will have to
raise $900m in cash for its share of the cash, but it will then have 10pc
less shares in issue. That potentially adds 7pc to Anglo's share price."
Yesterday, Anglo closed up 172p at �43.25, a gain of 4pc. However, there may
be concerns that the Oppenheimers are getting hold of De Beers on the cheap.
De Beers shares were trading at these levels before the Asian crisis erupted
in 1998.Mr Chaplin said: "The prospect of another bidder coming in is zilch,
I am afraid. Nobody is going to want to take on De Beers' problems in the
US." De Beers controls two-thirds of the world market for rough diamonds and
its directors are wanted by the US Department of Justice on anti-trust
charges. "My guess is that, if shareholders complain enough, the offer might
go up to $42-$44 a share," said Mr Chaplin.News of the offer was contained in
a "cautionary statement" issued in Johannesburg yesterday. De Beers advised
shareholders to "exercise caution when dealing in its linked units until a
further announcement is made". This could take several months.If it goes
ahead, the offer will mark the final reform of De Beers begun by Nicky
Oppenheimer when he became chairman four years ago. He has relaxed the
company's control over the diamond market and last month signed a deal with
French luxury goods group LVMH to use the De Beers brand for a new upmarket
jeweller.
