LNM could control Iscor by September 2003

Anglo-Dutch group LNM Holdings NV could secure a controlling stake of more than 50,1% in South Africa’s key steel company, Iscor (ISC), as early as September 2003.

On Tuesday, LNM moved to up its Iscor stake from 34,8% to 47% and the group can also earn up to 5% extra in Iscor if it achieves cost savings as part of a business assistance agreement signed in November 2001, bringing its total stake in Iscor to 52% by September 2003.

The South African government welcomed LNM’s move to up its stake in Iscor. An analyst called LNM’s partial offer, without a full minority offer, “a cunning move” as shareholders are likely to accept the offer price of R30 a share but the risk in the future is that Iscor’s share price could go lower, allowing LNM to buy cheaper Iscor shares.

Behind European steel maker Arcelor, the LNM Group, of which LNM Holdings NV is a wholly own subsidiary, is the second largest steel producer in the world, while Iscor has four South African steel operations and in its 2002 financial year produced 5,6-million tons of final steel products.

LNM on Tuesday made an offer to Iscor minorities to buy 12,19% of Iscor shares — 18,7% of the total minority shareholders’ holding.

However, its offer is conditional on minorities waiving their right to a mandatory minority offer from LNM, which is required by South African law once

a shareholder has a 35% or more stake in a company.

The LNM offer of R30 a share equates to $175-million for the 12,19% Iscor stake.

The benefits for Iscor, as a result of LNM’s increased stake, according to LNM are: further co-ordination of purchasing and marketing; accelerate Iscor’s transformation into a world class producer; and provide Iscor with a great level of technology.

The offer is subject to Iscor shareholder approval, the recommendation of the Iscor board, approval by the Securities Regulatory Panel.

No South African government or competition authority approval is required for the deal.

The offer closes on January 24, 2003 and payment of the consideration of 30 rand a share is set for January 29, 2003.

The South African government welcomed the LNM’s announcement that it was seeking to buy an extra 12.19% in Iscor.

The government said it believed that this will help increase the competitiveness of the South African steel industry within the global economy and help secure the future of a key area of beneficiation of South African resources.

“The government is supportive of the transaction and welcomes the retention of Iscor’s South African listing and a liquid market in the shares,” the

Department of Trade and Industry said in a statement.

The key sensitivity for the South African government is that it doesn’t want to be seen to be openly approving the selling off of the nation’s assets,

a source said.

Iscor shares were volatile on the JSE Securities Exchange South Africa (JSE) on Tuesday.

At about 1030, Iscor rocketed 11% or R2,40 to R24,10 on the news that LNM would make an announcement at 1230 regarding a further increase in its investment in Iscor.

Iscor’s share price touched an all-time high, since its unbundling in November 2001, of R27,75 following the news of the exact offer by LNM.

But by 1445, Iscor was trading at R23, down from its earlier highs due to that fact that LNM’s offer is only a partial offer, not a full offer as expected.

At 1700, the closing time on the JSE, Iscor finished 5% or R1,09 up at R22,79.

The LNM Group was established in 1976, with a 60 000 tons per annum rod mill in Indonesia. The LNM Group has vertically integrated steel making facilities in 10 countries and has a pending acquisition in an eleventh country. – I-Net Bridge

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