[miningmx.com] – THE Botswana government was unlikely to exercise
its pre-emptive right to buy shares in De Beers, said analysts.
As a result, Anglo American could tie up its $5.1bn takeover of the Oppenheimer
family stake in the diamond producer and marketer by the third quarter.
This follows approval by the South African government of the deal in terms of
Section 11 takeover regulations.
Anglo American said earlier this year it would bid for the 40% stake in De Beers
owned by the Oppenheimer family’s investment vehicle.
However, in terms of a previous agreement, the Botswana government has the right
to take up its pro-rata share of the Oppenheimer stake, which would lift its shares in
De Beers to 25% from the current 15%, and leave Anglo American with a 75%
stake in De Beers. This would cost the Botswana government $1.26bn.
“The Botswana government already has control of its stake in Debswana so it may
not make sense to follow its rights,’ said Des Kilalea, an analyst for RBC Capital
Markets.
“While it is impossible to predict what the GRB [Government of Botswana] will do,
we are of the view that there is little strategic rationale in the GRB spending $1.26bn
to increase their stake in a business that they already effectively “control’,’ said
Kieran Daly, an analyst for Macquarie Research in Johannesburg.
The Botswana government already owns 50% of De Beers’ Botswana business, via
the Debswana joint venture with De Beers, and effectively gets 80% of the income.
Botswana also has the right to market 10% of its own production from the joint
venture while De Beers is also relocating its sorting and marketing offices to
Botswana’s Gaborone.
If the transaction to buy the Oppenheimer shares in De Beers is completed by the
third quarter, there would be some marginal benefit to Anglo American’s full-year
results.
The diamond market is running flat to downwards currently, with analysts expecting
a recovery in the market to perhaps take longer than first expected. However,
diamond production at De Beers is on the rise in the second quarter of its financial
year.
