OWN CORRESPONDENT, Johannesburg | Friday
SHARES in South African steel giant Iscor soared on Friday on the second day after it announced plans to split into two separate companies in a bid to unlock value.
Shares in the steel and mining group rocketed to a new year high of R28 a share in early trading on the Johannesburg market, eclipsing the previous high of R21.20 set on Thursday after the company’s announcement.
“I think the share is still cheap. It’s trading at around R25 and could probably go through R30 easily,” said Allan Cooke, a mining analyst at Rice Rinaldi in Johannesburg.
Iscor, which is facing a shareholder revolt, has proposed to unbundle its mining assets into a new listed company, Minco, which it values at R32 a share.
The company’s troubled steel assets would be grouped in a second company, Steelco, which Iscor values at R20 a share.
The combined R52 a share would give Iscor a value of around R13bn.
Analysts said the valuation for Minco was reasonable, but they said the R20 a share for Steelco was much too high in view of its operational problems.
Iscor returned to profit this week, but the company has delivered poor results in recent years, partly due to record low world steel prices.
Iscor is also struggling under a mountain of debt from its loss-making Saldanha Steel joint venture with South Africa’s Industrial Development Corp (IDC).
Last month IDC and another major shareholder, Anglovaal Mining (Avmin), launched a bid to unseat Iscor Chairman Hans Smith and five other directors whom they blame for the company’s poor performance.
Avmin and IDC together hold 26% of Iscor.
Avmin officials were not available to comment on Iscor’s unbundling plans, but the company said it would still put its proposal before Iscor shareholders. – Reuters
ZA*BUSINESS:
Battle lines drawn at Iscor February 26, 2001
IDC set to iron out Saldanha Steel February 12, 2001
Avmin looks to give Iscor a shake-up February 1, 2001