Diamonds may be a girl’s best friend, but the business just ain’t what it used to be for De Beers.
The onetime diamond monopoly is reportedly looking at a $1 billion offer from a consortium that wants to take it over – a huge reduction from De Beers’ previous peak valuation of around $18 billion.
The British multinational is in sale talks with a group called Global Diamond Consortium, led by ex-De Beers CEO Gareth Penny, Bloomberg News reported Wednesday.
An ongoing diamond crisis has seen De Beers’ valuation plummet to around $2.3 billion as of February, according to the outlet.
Now Global Diamond Consortium wants to pay just $1 billion for the majority stake currently held by mining company Anglo American Plc, people familiar with the proposal told Bloomberg. The consortium would pay $750 million upfront, with the rest of the dough transferred later. That falls way short of a $50 billion approach from BHP group near the start of 2024.
But recent years have seen the diamond industry hammered by a variety of factors, Bloomberg noted. After a sales boom during the COVID pandemic, luxury spending in China – a key market for natural diamonds – plummeted. Meanwhile, synthetic diamonds rose in popularity, with wedding site The Knot finding that nearly half of engagement stones in 2023 were lab-grown diamonds. Demand for the genuine article nose-dived worldwide.
Recent trade tensions and geopolitical tumult have only worsened the situation, Bloomberg reported. Both Anglo and Global Diamond Consortium declined to comment to the outlet.
“The valuation (which is not confirmed) reflects the state of the diamond industry and the belief that the current challenges are long-term and not cyclical,” Joshua Freedman, senior analyst for the Rapaport Group, which covers the diamond industry, told The Post.
“It’s worth noting that the bidders are seeking outside funding for the deal, so it is dependent on external parties seeing enough value in De Beers,” he added.
Victorian imperialist Cecil Rhodes founded De Beers in 1888. Since not long after, the company has been virtually synonymous with the diamond business, for good and ill. The Oppenheimer family had a 40% stake in the company until 2011, when Anglo American bought it out.
Botswana – Africa’s biggest diamond producer – owns 15% of De Beers. The new owner will have to cut a deal with both the southern African country and Anglo American. Since the diamond industry hit the doldrums, growth in Botswana has essentially ground to a halt, according to the Economist.
A majority of De Beers’ diamonds come from there, though it also has mines in neighboring Namibia and South Africa, along with Canada.
Penny, who previously ran the company for five years, told the Economist turning the business around would require reviving demand.
“In over 30 years in this business I have never met a consumer that bought a diamond simply because it was shiny,” he was quoted as saying.
Diamond analyst Paul Zimnisky said the diamond industry is in “a generational lull.”
“This has significantly impacted the valuation, especially as it pertains to the value of inventories and the resource in the ground,” he told The Post.
Additional reporting by Lisa Fickenscher