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Privatization of De Beers and Possible Threats to Its Prosperity

2001: Privatization of De Beers and Advantages To The Shareholders

June 2001

You can’t buy De Beers stock anymore. At the end of May, the company officially went private, purchased by a consortium that includes the Oppenheimer family, Anglo-American, and Debswana. Shareholders balked at the original deal, but approved the new one when the consortium offered $2 more a share.

No one knows what all this means, or what this will lead to. But we do know the following:

* De Beers will be heavily indebted — at least in theory. This deal is a leveraged buy-out. However, in the case of an emergency, they can still rely on their old friend Anglo-American, which owns 45% of the new company.

* This will have no effect on the anti-trust issue — especially whether De Beers will ever be allowed to set foot in the United States. De Beers has already said this.

* De Beers will be less transparent. There will be no more of the annual reports that used to shed at least some light on the company’s operations. De Beers says they are not going to "hide," even when they go private. Still, it’s hard to imagine that they will be open as they are now — and a lot of people don’t think they are so open in the first place.

* It puts Nicky Oppenheimer’s entire attention on the diamond industry. Nicky’s predecessors, including father Harry, also had to run Anglo-American, which mines gold and platinum. This is probably a good thing.

The real winners of this deal were the shareholders. If you bought De Beers stock in January 1999, you paid $11. Now you’re getting around $46 a share. That’s a lot more than actual diamonds have appreciated. And considering that Nicky Oppenheimer is De Beers’ major shareholder, he is this deal’s biggest winner.

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