Outlook: Will London buy the Oppenheimers?

PERHAPS JULIAN Ogilvie Thompson suffered a blinding flash on the road to Damascus or something, but the words used in yesterday's statement announcing the merger of Anglo American with Minorco and its shift of domicile from Johannesburg to London - "focused management and accountability, operational control of core assets, simplicity and transparency of structure" - are not those generally associated with the Oppenheimers' Byzantine corporate empire. Indeed, the two things would seem pretty much a contradiction in terms.

Still, everyone is entitled to change their tune and it is to achieve these aims that the Anglo American chairman is embarking on this ambitious restructuring. The key question is, will the London market buy it? Are British portfolio managers really going to want to be part of such a culturally opaque, family controlled, business dynasty? There may be a will to change, but old habits die hard.

The answer is that to some extent they will be forced to, regardless of their doubts, since once Anglo becomes a FTSE100 company, many institutions will be forced to hold shares in the company as a matter of indexing policy.

But there is also a less cynical case that deserves to be heard. In many respects, the complexity of the Oppenheimer empire, which also takes in the De Beers diamond cartel, is a throw back to the days of apartheid and sanctions. These barriers and obstructions were as much a cause of the present structural maze as the family's attempt to reconcile control with its appetite for outside sources of capital.

Today, we are dealing with the new, outward-looking South Africa. Much of the raison d'etre for the old structure has gone, and it acts only as a deterrent to international investors, confusing, obfuscating and guaranteeing that the shares trade on a big discount to the value of the underlying assets. Reform is a vital necessity, not just in the interests of shareholder value, but also in the wider interests of South Africa, for without access to international capital, South Africa is dead.

These proposals stop a long way short of disentangling the relationship with De Beers and the family in its entirety. Anglo will remain the creature of the Oppenheimer family, which will maintain control both directly and through the central cross shareholdings with De Beers. Come now. The Oppenheimers are a proud and ruthless family which has dominated the diamond cartel for more than 70 years. Players like these don't roll over so easily.

But the effect of the restructuring is to clean the whole thing up, make it transparent, and subject it to normal capital market disciplines and rules of accountability. Crucially, the De Beers interest in eight principle operating subsidiaries is bought out, as are the other minority interests.

As for the change in primary listing and domicile, some are bound to see this as a slap in the face for the new South Africa. Is this not the Oppenheimers finally deserting the velt? Possibly these arrangements do make it easier for the Oppenheimers and others to escape certain capital controls and taxes, but as the South African government itself seems to acknowledge by backing the proposals, that is not the primary purpose.

Rather it is to make Anglo American into a genuine international company. It is a tribute to the bravery and vision of the ruling African National Congress that it continues to adopt this enlightened, outward-looking approach to the world in the face of persistent speculative attacks on its economy and currency. There is an implicit recognition, which other emerging markets would do well to share, that in order to attract vital foreign capital into the country, South Africa is going to have to allow its companies to go out.

In the end, however, Anglo American will stand or fall as a British-listed company not on any goodwill the City may feel towards the new South Africa, but on its performance and assets. There is no doubt that many investors are going to feel highly uncomfortable with a family controlled FTSE 100 company, and one, moreover, which is controlled from overseas. There is only one other FTSE 100 company that fits this description - BSkyB. Even so, as the biggest gold, platinum and copper mining company in the world, Anglo should attract a rather better following than the disastrous Billiton.

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