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March 2001

De Beers will soon be a private company, owned by Anglo-American (which will own 45%), the Oppenheimer family (which will own another 45%), and Debswana, a 50-50 partnership between DeBeers and the Botswana government (which will own 10%).

The $17.6 billion deal pays shareholders $44 a share. That’s a decent deal for shareholders, since De Beers’ stock spent most of the year under $30 — and was sometimes even below $20. Some shareholders, and some big investment groups, complained that the deal was too low, but as Reuters noted, it’s “an offer they may have not be able to refuse, even if they want to.” As one mining analyst told the newswires, “We feel this is a ‘take it or leave it’ offer.”

Nicky Oppenheimer said he made the decision after coming “to the conclusion that the best way forward would be to take De Beers private.” The Oppenheimer family will increase its holdings to 45% from 2.6%. Anglo already owns 32% of De Beers.

Nicky Oppenheimer said that the new deal would mean “no change” in its long-running battle with U.S. competition authorities. “It’s something we would like to resolve, but it’s been around for a long time, and it won’t be easy to resolve,” he said.

The deal is a reversal for the new De Beers. For a while they had been saying how they were severing ties with Anglo-American. Now the two companies are basically the same.

This will mean there will probably be even less transparency as to what De Beers is up to. For instance, how much profit it makes on its own mines and on the rough it buys from other producers. We will no longer have access to the tiny morsels of information the De Beers annual report used to reveal — such as the size of their inventory, how big the polished division is, and what production figures are for the various mines. It’s almost as if the trade is going back to the days of Cecil Rhodes, when the “Syndicate” was private, and everything was decided in private, closed-door meetings.

The deal unravels De Beers’ cross-holding of Anglo, which hurt De Beers’ share price. Investors dislike cross-holdings because they remove the prospect of a takeover.

In one way, Nicky Oppenheimer is carrying on a family tradition. Ernest founded The Diamond Corporation (the Syndicate) to control sales. Harry founded diamond advertising that expanded the market and made diamonds available to the middle class. Now Nicky is putting his stamp by vertically integrating De Beers to reach from the mine to the final customer.

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