Anglo's De Beers attracts interest from India's Agarwal, Qatari funds, sources say

By Clara Denina

LONDON (Reuters) -Diamond giant De Beers has drawn interest from at least six consortia, including commodities billionaire Anil Agarwal, Indian diamond firms and Qatari investment funds, sources close to the companies told Reuters.

As Anglo American pivots toward its core assets in copper and iron ore, it is divesting De Beers, although the move is complicated by a slump in global diamond prices.

Agarwal, chairman of Vedanta Resources, which has mines in Zambia and South Africa, is among the interested parties as part of a bigger group, two of the sources said, without specifying other members of the consortium or their strategy.

In 2017, Agarwal became Anglo American's largest shareholder with a stake nearing 20%, which he exited two years later, saying he had met his investment goals after the stock price doubled.

Anglo and Agarwal both declined to comment.Indian companies including KGK Group and Kapu Gems, which dominate the domestic cutting and polishing trade and are De Beers' biggest customers, have also expressed interest separately, as part of bigger groups, two separate sources with knowledge of the matter said.

Reuters could not establish who the other parties in the group were and whether a bid would be tabled.

KGK Group and Kapu Gems did not respond to requests for comment.

Anglo American, which values De Beers at $4.9 billion after recording $3.5 billion in impairments over the past two years, has retained its brokers Morgan Stanley, Goldman Sachs and Centerview as financial advisers to explore a potential sale, demerger, or public listing.

A spinoff and eventual listing is the alternative option for Anglo. Depressed diamond prices mean some of the interested parties will likely struggle to find funding, the sources said.

DIAMOND MARKET CRACKS

De Beers has been looking to streamline its business and reduce costs as it moves towards becoming a standalone company.

Anglo CEO Duncan Wanblad said in February that a trade sale is preferable, as it could be agreed earlier. He added that plans to divest De Beers "would be substantively complete" by the end of 2025.

An IPO would not happen until mid-2026, analysts estimate.

"The diamond IPO market is just littered with failure ... because the diamond business is long-term," said James Campbell, managing director of Botswana Diamonds.

"You need to invest very heavily in marketing to maintain your product. In today's world, you're managed to a large degree by fund managers who want quarterly performance."

QATAR INTEREST

Former De Beers CEO Gareth Penny, now chair of asset manager Ninety One, is also looking at putting together a consortium, backed by a Qatari investment fund, two sources close to the process said. He would become chairman of the potential new company, one of the sources added.

Although Qatar's QIA sovereign wealth fund had decided against a bid after showing initial interest, other Qatari investment funds - Mayhoola For Investments and Al Mirqab Capital - remain in the race, another source close to the process said.

Gareth Penny declined to comment. QIA, Mayhoola and Al Mirqab did not immediately respond to requests for comment during a national holiday.

Separately, the government of Botswana, which owns 15% of De Beers and supplies 70% of the company's annual rough diamond production, said that it is considering increasing its stake as part of the divestment process.

Although Anglo has a $4.9 billion book value for De Beers, and UBS analysts expect the mining giant to net $4 billion to $5 billion from its exit, the consensus value for the business is around $3 billion, according to consensus provider Visible Alpha, due to a slump in the diamond market.

Prices have fallen about 35% from early 2022 highs due to changing consumer preferences and the rise of lab-grown gems, according to the Zimnisky Global Rough Diamond Price Index.

(Reporting by Clara Denina, additional reporting by Felix Njini and Rajendra Jadhav; editing by Veronica Brown, Jason Neely and Louise Heavens)