The most iconic company founded in South Africa is getting a new owner

Anglo American has selected a group led by De Beers’ former boss Gareth Penny as the preferred bidder for its sale of the world’s biggest diamond mining company, people with knowledge of the matter said.

Anglo chose a group known as Global Diamond Consortium from three bidders, Botswana’s minister for the state president and defence, Moeti Mohwasa, told lawmakers on Friday.

That group is led by Penny, two of the people said, asking not to be identified because the details aren’t public. A spokesman for Penny declined to comment.

Botswana owns a 15% stake in De Beers and a 50% interest in Debswana, its diamond-mining joint venture with the company that produces most of the country’s diamonds.

GDC’s proposal “envisages participation” by fellow diamond-producing nations Angola and Namibia, according to Mohwasa.

“As it is entitled to do, the government has been engaging with Anglo American to evaluate all bids received, including that of the preferred bidder,” Mohwasa said.

“Government retains complete freedom to proceed either alongside the preferred bidder as a partner or to exercise its preemption rights alone or with a third party.”

Anglo is trying to sell De Beers as the diamond industry endures one of its deepest and longest downturns due to the rise in popularity of synthetic stones and a decline in Chinese luxury spending.

Since diamonds were discovered in Botswana in 1967, the industry has transformed the nation into one of Africa’s wealthiest on a per-capita basis.

“The transaction is a genuine opportunity to reset and strengthen Botswana’s position in an industry that has underpinned the nation’s development for half a century,” Mohwasa said. 

Botswana is not part of Penny’s consortium but is in talks with it, one of the people said. 

“We are progressing the competitive sale process with a number of bidders and will provide updates at the appropriate time,” a spokesperson for Anglo said in response to questions. 

Botswana is conducting a financial and legal due diligence exercise on how to increase its investment in De Beers, in which it has a pre-emptive right to buy Anglo’s entire interest in the company, Mohwasa said.

It has hired Lazard and CBH Bank as financial advisers and Desai Law Group and Clifford Chance as legal advisers. It has also appointed technical, diamond valuation and tax advisers, he said.

Botswana and its advisers are working closely to assess the optimal deal structure, the government’s level of participation and a valuation that best serves the country’s interests, Mohwasa said.

“Any financing decisions will be considered fully within the Government of the Republic of Botswana’s broader financing and debt strategy.”

The process is expected to close by the end of September, assuming Botswana gives its approval, with a final decision to be made by President Duma Boko, Mohwasa said.

Boko said last year that the country wants majority control of De Beers, although that now appears unlikely. Still, the nation may be satisfied with increasing its current holding, people familiar with the government’s thinking have previously told Bloomberg.

While Mohwasa said in a written reply to a parliamentary question that a controlling stake was still a possibility, he later said he wants the company to have “an experienced operator, strong financial backing and a clear business plan.”

Penny ran De Beers for five years, before leaving the company in 2010, when it was controlled by the Oppenheimer family.

He led it through the global financial crisis that slashed diamond prices, forcing him to idle mines and restore finances with a $1 billion rights offer.

His bid, backed by some of the world’s biggest diamond traders, centres on refocusing De Beers on mining and marketing natural diamonds. The company exited its lab-grown diamond business last year.

Botswana is the world’s largest producer of rough diamonds by value, with the stones making up the bulk of foreign currency receipts as well as about a third of budget revenue.

The downturn in the gem market has tipped the nation into a two-year recession and pushed its debt near its 40% of gross domestic product limit.