Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Anglo American chief executive Duncan Wanblad has admitted that selling the diamond business De Beers will be the hardest part of a radical restructuring the miner must deliver after rejecting a £39bn takeover bid from rival BHP.
A promise to dispose of De Beers, the world’s biggest diamond business, is part of plan that amounts to breaking up Anglo that Wanblad pitched to shareholders as a superior alternative to selling the company to BHP.
Other elements include demerging its Johannesburg-listed Anglo American Platinum business, selling its metallurgical coal business in Australia and shuttering or offloading its nickel mines in Brazil. That would leave Anglo as leaner business focused on copper, iron ore and fertiliser.
Wanblad said he was “undaunted” by the challenge of exiting four businesses in 18 months but stressed that securing a buyer or a listing for De Beers would be the most challenging.
“It is the one that is real bottom of cycle,” he told the Financial Times, referring to the slump in natural diamond prices that has already forced De Beers to cut this year’s production targets. “That [process] is going to take the longest.”
The 107-year-old Anglo had been working out how to streamline the sprawling business for several months but was forced to fast-track the strategy after BHP made its takeover approach in April.
BHP eventually dropped its six-week pursuit on Wednesday in the face of resolute opposition from Anglo’s board, leaving Wanblad under pressure to deliver on what he has promised.
Wanbald said Anglo would run the four transactions and restructuring in parallel, adding he had “great confidence” in Anglo’s ability to execute. “Investors are going to see continuous focus on delivery until we get it done in the next 18 to 24 months,” he said.
The 57-year-old South African added that he was fully committed to each disposal and would not change course, even if commodity markets shifted in favour of one of the businesses he has promised to exit. “That’s where I’m headed and I’m going to be undaunted in terms of getting from here to there,” he said.
Under Mark Cutifani, Wanblad’s predecessor, Anglo unveiled a similar radical plan in 2016 as Anglo faced a debt crunch but some asset sales such as Kumba Iron Ore were abandoned as performance improved.
Analysts have said that selling De Beers will be complicated by the rise of lab-grown diamonds and its ties to the government in Botswana, where it sourced almost 80 per cent of its stones last year.
Based on valuation estimates by Wood Mackenzie, a consultancy, De Beers would account for almost half of the $25bn that Anglo could secure from the sales. Its current value on Anglo’s balance sheet is $7.3bn.
“If they try to run a sales process, I think there will be limited interest. At this stage, an IPO or listing feels more likely,” said Rob Wake-Walker, a consultant at WWW International Diamond Consultants. “People will find it an incredibly complex and difficult deal to proceed with. If you’re not experienced in having a government partner, it’s a difficult one.”
De Beers is yet to finalise a 10-year sales agreement with the Botswana, which owns 15 per cent of the diamond miner. Wanblad said that he hoped an agreement would finalised within the next few months, saying that it had not been derailed by the BHP takeover battle. On Friday, Al Cook, the new boss of De Beers, set out plans to streamline the business.
Read the full article here
