Diamond rings are displayed in a cabinet inside a De Beers SA store in Hong Kong, China, on Thursday, Sept. 14, 2017. Chinese deluxe spending on travel is the “fastest-growing competitor” standing in the way of diamond sales in the world’s biggest consumer market, Chief Executive Officer Bruce Cleaver said in an interview. Photographer: Calvin Sit/Bloomberg via Getty Images
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Anglo American plans to spin off its highly prized De Beers diamond unit as part of a sweeping restructuring of its 107-year-old business as it seeks to fend off persistent takeover bids from mining rival BHP Group.
The British miner said in a statement Tuesday that De Beers could be divested or demerged to “improve strategic flexibility.”
It also plans to offload its steelmaking coal, nickel and platinum businesses as part of an accelerated strategic overhaul following a 2023 asset review.
Shares of the company were down 3.2% by 10:10 a.m. London time.
CEO Duncan Wanblad said the restructure, which represents “the most radical changes to Anglo American in decades,” would help streamline the business and provide greater value to shareholders.
“We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction,” Wanblad said.
“Anglo American’s shareholders will see the full undiluted upside from these extensive changes, with the value of our copper and iron ore assets brought to the fore,” he added.
The announcement comes just a day after Anglo rejected an improved takeover proposal from BHP. The Australian mining giant has been pursuing its British rival since late last month, seeking a multibillion-dollar deal that could produce the world’s largest copper miner.
Anglo said on Monday that BHP’s £34 billion ($42.6 billion) offer — an increase on its earlier £31 billion bid — continued to “significantly undervalue” the business and remained “highly unattractive” for shareholders.
Diamonds are not forever
Since rebuffing the offers, Wanblad has been under increasing pressure from shareholders to outline a strategy for the miner’s future, particularly amid concerns that its more lacklustre divisions are overshadowing its lucrative copper business.
Some analysts see the accelerated announcement of Tuesday as an effort to drum up demand from other potential bidders for the company’s non-core divisions, while deterring BHP’s hostile advances. Under U.K. takeover rules, BHP has up until May 22 to submit a formal and final offer or walk away.
“Anglo American has cleverly used its disclosure as a defence against BHP’s bid,” Jamie Maddock, energy and mining analyst at Quilter Cheviot, said in a statement.
“Those assets that would be put up for sale will most certainly appeal to competitors, some in aggregate (perhaps forcing an offer for the group, like BHP is attempting, before it breaks itself up) and some in part,” he added.
Still, John Meyer, partner and mining analyst at SP Angel, told CNBC that the overhaul could go some way in assuaging shareholder concerns, noting that there is “a lot of improvement” that can come from the plans.
De Beers was once the jewel in the crown of Anglo’s sprawling business, dominating the diamond market in terms of both total volumes and public psyche thanks to the enduring success of its 1940s “A diamond is forever” campaign.
The market has, however, come under pressure in recent years from the rise of lab-grown diamonds as consumers increasingly shift toward lower-cost and synthetic alternatives.