ALLAN SECCOMBE and OWN CORRESPONDENT, Johannesburg | Friday
PRESIDENT Thabo Mbeki has backed diamond giant De Beers proposed $17.6bn takeover by a group led by Anglo American and the Oppenheimer family, saying the deal promises massive capital inflows and economic benefits for the country as a whole.
Mbeki apparently gave the proposed deal the green light in a secret meeting with De Beers chairman Nicky Oppenheimer, Anglo Chief Executive Tony Trahar and managing director Gary Ralfe at the World Economic Summit in Davos last month.
“This deal as proposed does enjoy a very high level of support in the government,” said Ralfe. The proposed deal, which would end a series of investor-unfriendly crossholdings between Anglo and De Beers, would value the company’s diamond business at $8.3bn and its current 35.4% stake in Anglo at a further $9.3bn, Ralfe said.
“I’m pretty sanguine that what we call the pre-conditions and the conditions of the deal will be satisfactorily met,” Ralfe said, adding the deal could be concluded by June 2001.
Each holder of a De Beers share would receive 0.43 of an Anglo share, plus $14.40 in cash and a dividend of $1.00. It has already received conditional approval from the country’s Reserve Bank but still has to get shareholder backing and approval from competition authorities and the South African tax service.
This week Mbeki told parliament that government is pleased with the capital inflow the deal would generate, and he thanked De Beers’ management for discussing the deal with the state before it was finalised.
“It is clearly bringing major benefits to South Africa. The most notable is the inward investment, if the shareholders accept, of $2.9bn straight away with a further $700m later on,” Ralfe said.
The $2.9bn is effectively the money coming in from abroad to buy out De Beers’s South African shareholders. About half of the 60% of De Beers shares not held by the consortium are held in South Africa.
De Beers would not change the way it conducted business if the deal went ahead, Ralfe said. “I’ve been looking at that carefully together with the consortium, and our management is satisfied that nothing will change,” he said. “I can say categorically that I do not believe there will be any operational changes in De Beers.”
“I don’t think there will be any changes [in the diamond trade] at all, because that trade is characterised by private companies, who are very used to the Oppenheimer name, and it will be business as usual going forward.”
De Beers has embarked on a transformation process to shed its decades-old role as the guardian of the diamond market, replacing it with a strategy of becoming the “supplier of choice” under which it works to drive diamond demand higher rather than restrict supply. – Reuters
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