Anglo American and CHL Holdings Ltd. (CHL) announced an agreement in early November 2011 for Anglo American to acquire the Oppenheimer family’s 40% interest in leading diamond producer De Beers for $5.1 billion in cash. Closure of the transaction would increase Anglo American’s shareholding in De Beers from 45% to 85%.

Under the terms of an existing shareholders agreement between Anglo American, CHL and the government of Botswana, the government has pre-emption rights in respect of CHL’s interest in De Beers, enabling it to participate in the transaction and to increase its interest in De Beers, on a pro rata basis, to up to 25%. In the event that the government exercises these rights in full, Anglo American would acquire an incremental 30% interest in De Beers, taking its total interest to 75%, and the consideration payable by Anglo American to CHL would be reduced proportionately.

The transaction is subject to approval of Anglo American shareholders and to regulatory and government approvals. It is expected to close in the second half of 2012. The transaction does not alter existing arrangements for the management of De Beers, including Nicky Oppenheimer’s position as chairman, prior to completion. Philippe Mellier will continue as CEO of De Beers.

Anglo American has been De Beer’s largest shareholder since De Beers became a private company in 2001 and was a longstanding shareholder in De Beers prior to that. De Beers, together with joint venture partners, operates in more than 20 countries across six continents and employs more than 13,000 people. It has large-scale, low-cost diamond mining operations in Botswana, Namibia, South Africa and Canada, and a pipeline of greenfield and brownfield projects. Its portfolio includes distribution, sales and marketing capabilities and an expanding retail organization.

Cynthia Carroll, chief executive of Anglo American, said, “This transaction is a unique opportunity for Anglo American to consolidate control of the world’s leading diamond company—De Beers. This announcement marks our commitment to an industry with highly attractive long-term supply-and-demand fundamentals. Underpinned by the security of supply offered by a new 10-year sales agreement with our partner, the government of the Republic of Botswana, this forms a compelling proposition.

“De Beers’ management team has led the business successfully through the financial crisis and into a stable position, and it is now well placed for the future, with improving performance throughout 2011. I believe that the benefits brought by Anglo American’s scale; technical, operational and exploration expertise; and financial resources, combined with the unquestionable leadership of De Beers’ business and iconic brand, will enable De Beers to enhance its position across the diamond pipeline and capture the potential presented by a rapidly evolving diamond market.”

Nicky Oppenheimer said, “This has been a momentous and difficult decision as my family has been in the diamond industry for more than 100 years and part of De Beers for over 80 years. After careful and deliberate consideration of the offer, and what is in the best interests of the family, we unanimously agreed to accept Anglo American’s offer. Anglo American is the natural home for our stake, as they have been major shareholders in De Beers since 1926 and have a deep knowledge of the diamond business. I am certain Anglo American will provide strong support to Philippe Mellier and the De Beers management team.”