Solutions sought for SA mining merger

Date: 20/03/1997

By Tim Jones

SOUTH Africa's largest company is making little headway in convincing the European Commission to clear its major shareholding in UK-registered conglomerate Lonrho plc.

As the 2 May deadline approaches for the Commission to rule whether Anglo American Corporation's 28&percent; stake in Lonrho creates or reinforces a dominant position in the precious metals market, officials remain sceptical that the deal will be approved.

If Competition Commissioner Karel van Miert finds the merger to be against consumer interests, it will be the second time he has stymied a Lonrho operation within two years.

In April last year, Van Miert blocked a proposed merger between the platinum mining interests of Lonrho and those of its rival Impala, a 47&percent;-owned subsidiary of Gencor.

Van Miert was concerned that Impala and Lonrho together commanded 28&percent; of the world platinum market and could use the merger to reinforce their position, although their mining interests are concentrated in southern Africa and Australasia.

Dieter Bock, then chief executive of Lonrho, had pressed for the firm to be split into its mining and non-mining sectors, but had difficulties finding a buyer for the platinum interests.

Once the Commission had blocked the Impala/Lonrho deal, Anglo American stepped in - first acquiring a 9&percent; stake in Lonrho and then buying Bock's own 18.5&percent; shareholding.

Anglo stressed that it was not interested in bidding for the whole of Lonrho, but might like to take control of the mining division after a de-merger - something the Commission wanted to avoid.

When he announced his veto of the original deal in April 1996, Van Miert issued a warning to Anglo American that if it tried to extend direct influence over Lonrho's platinum division, this too would be banned. His officials remain concerned about the possible creation of a duopoly in the supply of platinum.

As decision-time approaches, competition officials are examining a series of possible solutions to the firms' anti-trust problems. The first is an outright veto of the 28&percent; shareholding, but the companies are trying to avoid this, possibly through the divestment of Lonrho's Western Platinum and Eastern Platinum interests.

At the moment, Anglo American is not permitted to vote on the basis of its shareholding in Lonrho.

Given the Commission belief that the shareholding is too big, officials could choose to continue the ban on Anglo American voting or force it to reduce the size of its stake.