Anglo American Plans De Beers Sale After Rejecting BHP Offer

Anglo American (LSE:AAL,OTCQX:AAUKF) announced plans to divest its De Beers diamond business as it moves to restructure in the face of a takeover bid from rival miner BHP (ASX:BHP,LSE:BHP,NYSE:BHP).

In a Tuesday (May 14) press release, the company said it wants to streamline its operations and focus on high-demand sectors such as copper, iron ore and crop nutrients, creating what it believes is a "future-enabling portfolio."

The move comes after Anglo’s rejection of BHP’s US$38.8 billion bid in late April. If it had gone through, it would have been one of the resource industry's largest mergers and would have produced the world’s leading copper producer.

“We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction,” said Anglo CEO Duncan Wanblad.

Anglo hopes that by streamlining its portfolio it will be able to position itself favorably in the rapidly evolving mining sector, particularly as demand for materials critical to renewable energy and electric vehicles continues to rise.

The restructuring would also involve the demerger of Anglo American Platinum (OTC Pink:AGPPF,JSE:AMS), and the divestment of the company's steelmaking coal business. Anglo will explore options for its nickel operations.

Anglo plans to reduce its investment in its Woodsmith potash mine in North Yorkshire, England, as well.

A hurdle for the offloading of De Beers is the Botswana government's 15 percent stake in the business.

In a media call, Wanblad expressed support for the growth strategy Anglo has developed for De Beers, but said the company thinks it is "better executed by different owners and in a different structure."

Anglo American acquired De Beers in 2011, buying the Oppenheimer family's 40 percent stake for US$5.1 billion.

Like other luxury goods, diamonds have experienced a decline in global demand. De Beers, which both mines diamonds and produces synthetic gems through its Lightbox Jewellery unit, has responded by limiting supply and offering flexibility to contracted customers. In February, Anglo announced a US$1.6 billion impairment charge on the division.

Reuters notes that a London listing for De Beers could be advantageous for the sluggish UK stock market, which has attracted only 2 percent of European initial public offering volumes this year.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.