Anglo American explores De Beers IPO as part of break-up, sources say

Vector

14/05/2024 14:36

(Adds details of potential valuation in paragraph 7, background
on diamond industry in paragraph 9)
    By Anousha  Sakoui and Clara Denina
       LONDON, May 14 (Reuters) - Anglo American  AAL.L  is
exploring an initial public offering of its diamond business De
Beers, two people familiar with the matter told Reuters on
Tuesday, with one flagging London as the preferred venue. 
    The potential listing was the default option, the second
person said, although the process is at an early stage. Both
were speaking on condition of anonymity because the plans are
private. 
    The London-listed miner set out on Tuesday its plans for a
potential break-up via a demerger or sale of some of its assets,
as it fights off a $43 billion takeover bid from BHP Group
 BHP.AX . 
    CEO Duncan Wanblad said the plan was to spin out or sell De
Beers, without giving further details. Anglo holds 85% of De
Beers, while the government of Botswana, the location of its
biggest mines, owns the remainder. 
    Anglo declined to comment. Botswana's government did not
immediately respond to a request for comment.
    "De Beers is a great set of assets and it's a great
business," Wanblad told a media call earlier on Tuesday. "It is
sitting at the bottom of a cycle. That cycle is more
macroeconomic than fundamental." 
    De Beers could fetch a valuation of 8 to 10 times core
earnings, one of the people said. 
    Although he supports the growth strategy Anglo has developed
for De Beers, the world's largest diamond producer by value,
Wanblad said Anglo believes it is "better executed by different
owners and in a different structure" from today's.
    Like other luxury goods, diamonds have suffered a fall in
global demand. De Beers, which both mines diamonds and produces
synthetic gems via its Lightbox Jewelry unit, has been limiting
supply and offering flexibility to contracted customers. 
    In February, Anglo announced a $1.6 billion impairment
charge on the division. It acquired De Beers in 2011, buying the
Oppenheimer family's 40% stake for $5.1 billion. 
    A London listing would be a boost for the UK stock market,
which as of last month had attracted only 2% of European IPO
volumes this year, according to Dealogic Data, reflecting a
sluggish economy and a perception the market is undervalued. 

 (Reporting by Anousha Sakoui and Clara Denina; Editing by
Veronica Brown, Catherine Evans and Jan Harvey)
 ((anousha.sakoui@thomsonreuters.com;))