Anglo American to sell famous diamond business De Beers in breakup plan

South Africa has backed Anglo American’s plan to sell the famous diamond business De Beers as part of a historic corporate overhaul to defend the company against a £34bn takeover plot.

The embattled London-listed mining company set out a radical new strategy to dismantle parts of the 107-year-old company, including the sale of the world’s biggest diamond miner, after fending off a second unsolicited takeover offer from the Australian miner BHP.

The proposal has won support in South Africa, which is Anglo’s largest shareholder through its Public Investment Corporation (PIC) and the birthplace of Anglo and De Beers.

The South African mining minister, Gwede Mantashe, said that he would prefer Anglo’s restructuring plan over a takeover by BHP. The plan was also welcomed by the Congress of South African Trade Unions.

The Anglo chief executive, Duncan Wanblad, said the “most radical changes to Anglo American in decades” would create a simplified company with a focus on its remaining “world-class assets” in copper, iron ore and fertilisers.

The overhaul is designed to fend off further unsolicited advances from BHP, which sought to force Anglo to off-load its two Johannesburg-listed subsidiaries, the platinum miner Amplats and iron ore miner Kumba, before completing the deal.

Instead, Anglo’s overhaul would include letting go of De Beers alongside the “orderly” sale or demerger of its South African platinum business and its steel-making coal assets. Anglo also plans to slow its investment in the Woodsmith fertiliser mine in the North York Moors next year from £1bn a year to £200m before seeking strategic investors to restart full-scale work on the polyhalite project from 2026.

Mantashe told the Financial Times: “I am happy with the rejection of the BHP deal and I hope it will continue, then Anglo can restructure itself to optimise value for shareholders.”

Related: Anglo American rejects new £34bn offer from mining rival BHP

BHP’s chief executive, Mike Henry, urged Anglo investors to consider the merits of his company’s bid. He said: “They have to look at the plans, decide which one they believe is going to create the greatest value soonest.”

Anglo’s strategy raises questions over the future of De Beers, which has been linked to Anglo American for almost 100 years. The diamond miner was founded in South Africa by the British mining magnate Cecil Rhodes who began sending gems back from South Africa to London in 1889. It was part-owned by the Oppenheimer dynasty, which founded Anglo American, from the 1920s until the family sold its 40% stake to Anglo in 2011. Today, Anglo holds 85% of the company while the government of Botswana holds the remaining 15%.

A source close to the company said Anglo was considering an initial public offering of De Beers as “the default option” for the business. However, the idea has been dismissed as “unlikely” by another source owing to the difficulty in establishing the future value of diamonds after a volatile period for the market.

The diamond business has struggled with falling sales in recent years because of the sluggish global economy and rising competition from lab-created alternatives. The source said it would be easier to dismantle De Beer’s interests in South Africa, Namibia and Botswana as well as its synthetic diamond business to sell off separately.

Wanblad said De Beers remained “a great business” which has already seen interest from prospective investors. “There’s no doubt in our mind that the structural issues that everyone talks about will pass,” he added.

The chief executive faces pressure from investors to prove that he can turn around Anglo’s flagging market value, which has left the company vulnerable to takeover by larger rivals. BHP’s takeover plans are expected to face competition from the Swiss mining company Glencore and the British-Australian miner Rio Tinto.

Wanblad dismissed BHP’s approaches as “highly unattractive” because they undervalue the company’s long-term potential value. He also criticised BHP for the “disrespectful” timing of the approach before what is expected to be a highly contested general election in South Africa at the end of the month.

Wanblad said BHP’s approach had forced him to set out a new strategic vision for the company at a critical time for South Africa’s government, which holds a 7% share of the company through the PIC. “I would have handled this in a very different sort of way – and a very private sort of way,” he said of BHP’s approach.

The governments of South Africa and Botswana were approached for comment.