Anglo American to Pay $2.8 Bln for Minorco and Control of Coal Affiliate
Anglo American to Buy Minorco, Coal Unit for $2.8 Bln (Update4)
(Rewrites paragraphs 2 through 5 to highlight De Beers
connection; adds closing stock prices.)
Johannesburg, Oct. 15 (Bloomberg) -- Anglo American Corp.
of South Africa Ltd. agreed to pay about $2.8 billion for the 54
percent of Minorco SA it doesn't own and take control of an
Anglo coal affiliate, simplifying a web of cross-holdings in
Africa's mining industry.
In a separate transaction, De Beers Consolidated Mines
Ltd., Anglo's largest shareholder, will surrender its stakes in
copper, coal and gold mines to Johannesburg-based Anglo in
exchange for about 40 percent of a new, London-based company --
focusing De Beers on the diamond-sales monopoly that is its main
business.
By cutting through the multiple links among De Beers, Anglo
and Minorco, South Africa's Oppenheimer family -- which built up
the businesses since 1917 -- hopes to make the companies more
attractive to investors following a plunge in commodity prices.
''Investors want clarity, they don't want mining companies
to be a diversified conglomerate,'' said Russell Skirrow, an
analyst at Merrill Lynch in London. ''There are mining companies
out there still operating in the Jurassic period -- the days of
the conglomerate have gone.''
Together, the transactions will create a company with $16
billion in revenue, double that of Anglo's rival, London-based
Rio Tinto Plc. The new company, Anglo American Plc, will have
its headquarters and main stock listing in London.
Cash Alternative
Minorco shareholders will get one new share in the new
Anglo American Plc for every two shares they hold, or $16 in
cash, valuing the whole of Minorco at about $3.9 billion in
stock or $3.6 billion for the cash alternative based on
yesterday's stock prices.
Holders of Anglo American of South Africa will get one new
share of the new company for each share they hold. At the same
time, Anglo agreed to buy out the 43 percent of its Anglo
American Coal Corp. affiliate it doesn't already own. Anglo Coal
holders would get either 175 new shares of Anglo American Plc
for every 100 shares of Anglo Coal they hold or a total of about
4 billion rand ($710 million) in cash.
Minorco shares surged 17 percent, or 13.2 rand, to 90.2
rand, slightly less than the $16 cash alternative of Anglo's
cash-or-stock bid. The stock has risen from a six-year low of
53.5 rand touched in August amid speculation Anglo would bid.
Anglo, which would be converted one-for-one into stock of the
new company, fell 7 percent, or 13.8 rand, to 183.2.
The purchase is the latest sign that a plunge in commodity
prices -- mainly because of recession in Asia -- is pushing
mining companies to cut costs through a wave of consolidation.
Anglo rivals such as Rio, Billiton Plc and Lonrho Plc are all
looking for acquisitions. Gold prices are near 19-year lows, and
copper touched an 11-year low earlier this month.
Mining Transfers
Anglo also will take control of gold, platinum and zinc
mining projects it jointly holds with De Beers, the world's
biggest diamond marketer and Anglo's largest shareholder.
As the No. 2 mining company in revenue terms, Anglo already
is the world's biggest producer of gold and platinum and has
major interests in coal, copper and other base metals. The
purchases will give Anglo, whose operations are focused in
southern Africa, full ownership of mines in Europe and the
Americas that were spun off to Minorco five years ago.
Minorco's role as the overseas wing of Anglo American since
1993 has prompted suspicions -- which the company consistently
dismissed -- that Anglo was attempting to shelter its overseas
assets from possible nationalization by South Africa's black-led
government that took over in 1994.
The transaction is a blow to South Africa, whose
Johannesburg stock exchange will lose the primary listing of the
nation's biggest company to London. Anglo American also will
move its headquarters to London from Johannesburg. The move
reflects Anglo's desire to win the backing of leading money
managers, who increasingly are concerned about making
investments in the emerging markets of Asia and Africa.
Out of Africa
''It moves their center of gravity out of Africa,'' said
Anton von Below, a portfolio manager at ABN Amro in South
Africa. ''It is a case of transforming the company along
commodity lines and turning it into a major international
player.''
Nicky Oppenheimer, chairman of De Beers and deputy chairman
of Anglo, sought to quell concern his company was abandoning
South Africa, saying De Beers would retain control of at least
40 percent of Anglo -- on par with the South African ownership
of Anglo when his grandfather founded the company in 1917.
''Through the creation of Anglo American Plc, a great South
African company will be transformed,'' Oppenheimer said. ''De
Beers believes that this is a matter of pride for South
Africa.''
The family holds between 7 percent and 8 percent of both
Minorco and Anglo, and will have an equivalent holding in the
new company, said Julian Ogilvie Thompson, Anglo's chairman.
In the third part of the transaction, De Beers will swap
its stakes in coal, zinc, gold and platinum mining projects with
Anglo for a stake of at least 40 percent in the new Anglo
American Plc. That move would consolidate all De Beers' non-
diamond assets within Anglo.
As part of the transaction, Anglo will take control of the
stakes that De Beers holds in AngloGold Ltd., Anglo American
Platinum, which is known as Amplats, and Mondi Ltd. Anglo also
plans to sell its stakes in Beverage & Consumer Industry
Holdings Ltd. and South African Breweries Ltd.
Anglo said the new company would have a market value of 6.1
billion pounds ($10.4 billion), allowing it to be included in
the benchmark FT-SE 100 Index in London.
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