Anglo still on Lonrho trail in spite of EU defeat
Anglo's surrender this week will make its quest for Lonrho more arduous, writes SVEN LUNSCHE
Anglo sources on Friday confirmed that the company would settle its dispute with the European Commission over its 25.8% stake in UK-based Lonrho by reducing its share to below 10% over the next two years.
Anglo's surprise retreat this week was widely interpreted as a defeat of South Africa's largest company in the face of the EU's tough stance on competition.
However, Anglo sources interpreted the move as a tactical retreat. "Clearly this makes our ambitions more difficult to achieve, but we still have the scope to pursue the interest we set out when we invested in Lonrho."
The EC decided Anglo's increase of its stake in Lonrho last October from just under 10% would create excessive concentration in the global production of platinum.
Analysts have said that Anglo's main aim in buying the 18% stake in Lonrho from the company's former chief executive Dieter Bock was to gain Lonrho's 31% stake in Ashanti Goldfields of Ghana.
The Anglo sources said the settlement would not affect any future Anglo plans to pursue Lonrho's interests in sugar, coal or Ashanti. "It is not just mining. There's coal (and) there is sugar. There is no legal barrier. The EU is not interested in anything but platinum."
Anglo's surprise move should allow the EU's anti-trust authorities to give the October deal the go-ahead. Karel van Miert, the competition commissioner, is expected to give his formal approval this Wednesday.
During the two-year period Anglo will not be able to vote its Lonrho shares, although it has complete flexibility over when it can sell them.
Analysts said Anglo would contemplate the sale of shares only once the European courts had ruled on an appeal by Gencor against an EC ruling which last year blocked a merger between Gencor's Impala Platinum and Lonrho's SA platinum operations.
If the court overturns the EC ban on an Impala-Lonrho Platinum merger, it would remove the platinum operation from Lonrho and clear the way for Anglo to retain its 25.8% stake in the group.
Another consideration for Anglo is Lonrho's share price. Having paid 180p for it in October last year, Anglo will contemplate a sale only once Lonrho's share price moves well ahead of its current 137p level. "We will consider the sale when it is advantageous," the Anglo sources said.
After receiving an EC draft ruling in February compelling the group to sell almost all of its shares within six months, Anglo proposed placing 5.84% of the Lonrho capital in a voting trust and ring-fencing undertakings which would have isolated Anglo's influence on Lonrho's platinum operations.
However, this was rejected by the EC, which ruled that any shareholding above 10% would have constituted a "decisive influence" by Anglo over Lonrho.
"After deliberation, we took the view that a settlement of this nature was better than the uncertainty of a battle in court and agreed with reluctance to accept the EC proposal," the Anglo source said.
Reuter reports from London that Lonrho shrugged off news of Anglo's decision. The size of Anglo's holding would have no bearing on Lonrho's long-stated plan to break itself up, a company spokesman said on Friday.