De Beers Studies U.S. After 60-Year Ban in No. 1 Market

De Beers Studies U.S. After 60-Year Ban in No. 1 Diamond Market
De Beers is studying an entry into U.S. diamond polishing and retail after settling lawsuits that barred it for about 60 years from the top market for the gems. Source: De Beers Group via Bloomberg

De Beers, being taken over by Anglo American Plc, is studying U.S. diamond retailing and polishing after settling lawsuits that had prevented it operating directly in the biggest market for the gems for more than 60 years.

“We couldn’t do business in the U.S. since 1948,” Chief Executive Officer Philippe Mellier, 56, said in an interview. “That’s clearly one of the avenues we’d like to pursue, to grow the business as De Beers in a much bigger way in the U.S.”

A $295 million agreement by De Beers, the largest diamond supplier by sales, to settle antitrust suits became effective in May, ending restrictions on U.S. operations. The nation accounts for about 45 percent of diamond-jewelry sales. De Beers operates 10 De Beers Diamond Jewellers stores in the U.S. through a tie-up with Paris-based LVMH Moet Hennessy Louis Vuitton SA.

The joint venture stores were set up with a “completely independent management team” before the final settlement, De Beers said in an e-mailed response to questions.

“It’s not like it hasn’t been operating in the U.S., it just hasn’t been operating directly in the U.S.,” Omar Saad, an analyst at International Strategy & Investment Group LLC in New York, said today by telephone. “Is it better for De Beers to be able to control its distribution and operations in the world’s largest diamond market? Yes. Is it a massive shift in the competitive landscape? I doubt it, at least not anytime soon.”

Oppenheimer Family

The company, with mines in Botswana, Canada, South Africa and off the Namibian coast, isn’t ruling out setting up its own diamond cutting and polishing facilities in the U.S. “Not now, but never say never,” Mellier said near Gaborone in Botswana.

Anglo American is buying the Oppenheimer family’s 40 percent in De Beers for $5.1 billion, increasing the company’s holding to 85 percent. Botswana owns the rest of the business.

The deal should be effective “within days,” Mellier said in the interview yesterday. “We are going to agree” with Anglo “and implement ideas to grow the business,” he said.

Mellier joined the company in July 2011, marking a break with De Beers’ tradition of internal hiring. An engineer with a background in cars and trains, Mellier had been vice president for Alstom SA’s rail equipment and transportation services.

“What we want to do is improve on what we do in the mines because that’s the biggest part of our business,” he said.