Sourcing

Anglo American Reportedly Shopping De Beers as BHP Eyes Anglo

SourcingApr 26, 2024

Anglo American Reportedly Shopping De Beers as BHP Eyes Anglo

Big changes appear to be on the horizon for the diamond miner and its parent company, Anglo American.

De Beers Venetia diamond mine in South Africa
Anglo American reportedly is shopping De Beers while the miner itself is being eyed as a potential acquisition target by BHP Group. BHP’s interests lie in Anglo America’s copper operations in South America. Pictured is De Beers’ Venetia mine in South Africa. (©De Beers Group/Photo credit: Ben Perry @ Armoury Films)
London—Anglo American is in talks with potential buyers for De Beers Group, The Wall Street Journal reported Thursday, citing unnamed sources.

According to the report, Anglo has had conversations with “luxury houses” and “Gulf sovereign-wealth funds” in recent weeks, though the story noted that discussions are in the early stages and no valuations have been discussed.

A De Beers spokesperson directed inquires about the Journal’s story to Anglo American, stating only, “For De Beers, our focus continues to be on delivering our strategy in the interest of all our stakeholders.”

Anglo declined to comment, but the mining company wrote down the value of De Beers by $1.6 billion earlier this year, citing “macroeconomic sentiment impacting our view on near-term consumer demand for luxury goods” in the United States and China, where demand has been slow to recover post-COVID.

It also noted during its February earnings call that all of its assets are up for strategic review.

Reports of Anglo American shopping De Beers followed news first reported by Bloomberg on Wednesday that BHP Group Inc. had made an unsolicited bid for Anglo.

The offer, which Anglo and BHP acknowledged in separate statements, valued the company at £25.08 per share for a total value of £31.1 billion ($38.9 billion). It involved spinning off Anglo’s platinum business and its Kumba Iron Ore operations in South Africa while retaining its copper mines in Peru and Chile and iron ore operation in Brazil.

Copper, which accounts for 30 percent of Anglo’s total production, is in demand right now and commanding high prices because of its use in “green” energy solutions, like wind turbines, solar panels, and electric and hydrogen fuel cell vehicles.

“BHP is the largest diversified miner in the world, and they have made it very clear that their interest is in metals that are going to be needed in the renewable energies revolution,” diamond industry analyst Paul Zimnisky said in an interview with National Jeweler Thursday. 

On Friday, Anglo announced it had rejected BHP’s proposal because it “significantly undervalues” the company and its future prospects. 

Anglo Chairman Stuart Chambers called the offer “opportunistic” with a “highly unattractive” structure. 

“Anglo American is well positioned to create significant value from its portfolio of high quality assets that are well aligned with the energy transition and other major demand trends,” he said. 

“With copper representing 30 percent of Anglo American’s total production, and with the benefit of well sequenced and value-accretive growth options in copper and other structurally attractive products, the board believes that Anglo American’s shareholders stand to benefit from what we expect to be significant value appreciation as the full impact of those trends materializes.”

As for De Beers, Zimnisky noted that diamonds are a unique asset because they are a mined commodity, but they also are a luxury product, one that is facing challenges right now, including competition from lab-grown diamonds. 

“It’s complicated and you need a suitor that wants to take on the challenge that comes with that,” he said. 

“There are a lot of moving parts but it feels like if [Anglo] were to sell De Beers now, it would be selling at the bottom, and I think De Beers needs to be in the hands of someone who thinks longer term and will spend the marketing dollars necessary to keep diamonds relevant into the future. 

“De Beers needs to be coddled right now. It can’t be sold off to someone who sees it as a value play.”

 Related stories will be right here … 

BHP’s bid for Anglo was unsolicited and non-binding. It has until May 22 to make a formal offer. 

“BHP could certainly come back with a more generous offer, and we could also possibly see other suitors come to the table,” Zimnisky said.

“For instance, Rio Tinto or Switzerland-based miner Glencore would probably love to add some of Anglo’s top assets, especially the copper, to their portfolio if the price is right.”

Ben Davis, a London-based metals analyst for Liberum, said via email Thursday that De Beers is unlikely to be of interest to any other companies that may come forward to bid on Anglo American, except Rio Tinto.  

“De Beers probably is for sale,” he wrote, “but I think there is probably a tough valuation discrepancy that is too hard to overcome for any outright buyers. Middle East sovereign funds have been singled out in the press, but again I would be surprised for anyone to buy it outright.

“De Beers has both underfunded CapEx (capital expenditures) and marketing spend to think about.” 

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