Change of ownership at Lazare Kaplan

Brian Benza | Friday January 10, 2014 17:27

The proposed transaction, which is still going through regulatory scrutiny, will see Trau acquire 51% issued share capital in LKB, leading to 100% shareholding.

Trau Brothers, which is currently a minority shareholder in the American company, will solely control LKB after the transaction.

LKB, a subsidiary of Lazare Kaplan International (LKI), is a sightholder of the Diamond Trading Company Botswana.  It is also involved in the diamond cutting and polishing industry in Botswana. 

Furthermore, Trau Bros NV is a company registered under the Laws of Belgium and is engaged in diamond polishing and distribution.

Currently Trau Brothers is present in Botswana only through its minority stake in LKB.

In an interview with Business Week, former LKB managing director Alfred Dube said that Trau Brothers initially acquired the 49% equity over 20 months ago.

The initial acquisition by Trau Brothers made the company a technical partner at the factory.  It is also one of the most venerable sightholders with a 66-year track record as a customer of DeBeers.

“It is envisaged that Trau will acquire the balance of ownership of LKB, injecting further investment, expertise and support for the continuity and expansion of operations.

“This will be a standard commercial transaction driven by corporate considerations on the part of both LKI and Trau relating specifically to LKB, and will not represent an overall exit from Botswana of LKI,” said Dube who left his post at the end of 2013.

Dube added that the transaction should be viewed as reflecting the maturation of Botswana’s beneficiation sector as a normal secondary market for shares.  It will not have any impact on the delayed OPIC financing facility, Dube said.  The  $250 million (P2.2 billion) Overseas Private Investment Corporation (OPIC) facility has been hanging in the balance for the past five years. The financial package put together in 2009 by USA’s OPIC, a diamond and jewellery company, LKI and ABN Amro was supposed to have been rolled out five years ago.  

The deal fell through after relations soured between the stakeholders.

The fallout led to ABN Amro, which has already set up an office in Gaborone as part of the original deal, leaving the picture. 

ABN Amro’s exit in the OPIC deal further led to Standard chartered Bank Botswana being roped in as the participating bank.

“The change of LKB ownership will be entirely independent of, and have no bearing on, the OPIC facility, the future of which will become clearer in the year,” said Dube.

Specifically, the facility will enable 26 diamond-manufacturing companies in Botswana to access long-term capital. 

The capital will finance the purchase of rough diamonds for processing, and facilitate the development of a financial sector to support development of a cutting and polishing sector in Botswana. The Botswana diamond downstream industry lacks liquidity with its margins under pressure as banks are becoming more reluctant to finance the purchases of rough, the manufacturing of rough, and the subsequent exports.

 “The OPIC Guaranty issue is a political rather than a commercial matter. The industry can operate without ABN AMRO’s presence in Botswana. But to have commercial loans for manufacturing in Botswana guaranteed by the US government is not just a trivial matter – it gets to the heart of the beneficiation efforts. The Botswana government – and other banks – should intervene and act now to secure the promised (and authorised) US government assistance for Botswana’s beneficiation aspirations,” said prominent diamond industry commentator, Chaim Even-Zohar.