Anglo American is exploring an initial public offering (IPO) of its diamond business, De Beers, with London being the preferred venue, according to sources familiar with the matter.
These discussions are still in early stages, and the individuals spoke on condition of anonymity due to the private nature of the plans.
The potential listing was revealed as Anglo American announced its broader strategy for a possible break-up through a demerger or sale of some assets. This move comes in response to a $43 billion takeover bid from BHP Group.
CEO Duncan Wanblad confirmed the plan to spin out or sell De Beers but did not provide further specifics.
Anglo American holds an 85% stake in De Beers, while the government of Botswana, home to its largest mines, owns the remaining 15%.
Both Anglo American and the Botswana government declined to comment on the matter.
“De Beers is a great set of assets and a great business,” Wanblad said during a media call. “It is currently at the bottom of a cycle, which is driven more by macroeconomic factors than by fundamental issues.”
One source indicated that De Beers could achieve a valuation of 8 to 10 times its core earnings. Despite supporting De Beers’ growth strategy, Wanblad noted that Anglo American believes the business would perform better under different ownership and structure.
The global diamond market, like other luxury goods sectors, has seen a decline in demand. De Beers, which both mines natural diamonds and produces synthetic gems through its Lightbox Jewelry unit, has been limiting supply and offering flexibility to contracted customers in response to market conditions.
In February, Anglo American reported a $1.6 billion impairment charge on the De Beers division. The company acquired De Beers in 2011 by purchasing the Oppenheimer family’s 40% stake for $5.1 billion.
A London listing would provide a significant boost to the UK stock market, which had only attracted 2% of European IPO volumes this year as of last month, reflecting a sluggish economy and undervaluation concerns, according to Dealogic data.
