British Indian steel magnate gets nod for acquisition

Friday, 14 May 2004, 19:30 IST
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JOHANNESBURG: The South African Competitions Commission has given the nod for London-based British Indian steel magnate Lakshmi Mittal to take over former state-owned steel producer Iscor. Releasing its long-delayed judgment here Friday, the commission said it had no concerns regarding the merger between Mittal's company LNM and Iscor, recommending unconditional approval to the Tribunal of the Commission, which has to make the final decision. This is expected within a few weeks, but analysts here expect that this will be a mere rubber-stamping of the recommendation. LNM Holdings, led by Mittal, has been waiting for a decision since December last year on an application to up its stake in Iscor from its current 49 per cent to more than 50 per cent. A majority stake would allow LNM to introduce proprietary technology at Iscor to further improve efficiencies there. LNM earlier confirmed that it would not seek to go beyond 60 per cent, at which stage it would need to make an offer to minority shareholders. "We are of the view that the merger is unlikely to affect competition substantially in the markets for steel products as there is no overlap in services or products of the firms concerned in South Africa. The merged entity's market shares are also small in the global context," said Lizél Blignaut, Manager, Mergers and Acquisitions Division. The decision was delayed as the local steel industry sought intervention by the government to get Iscor to commit to a differentiated pricing structure locally as the industry battles to survive amid rising international steel prices. The trade and industry minister also made a submission on public interest grounds. The commission considered the submissions of the minister and found that the merger would not have significant negative effect on public interests. The commission noted that after amicable and constructive discussions between the South African Department of Trade and Industries and LNM Holdings in London last week, an agreement was reached on the development of a sustainable and competitive pricing model for the South African steel industry. The commission hoped that this would produce some positive outcomes regarding the price of steel for local purchasers. The commission also rejected objections by trade unions representing workers at Iscor, who said the merger would result in a loss of jobs. Several trade unions participated in the merger proceedings and made submissions. "Our investigation revealed that the continuing retrenchments were not as a result of the merger under review," Blignaut said. The National Union of Mineworkers of South Africa (NUMSA), however, said it would continue its opposition to the takeover. LNM bailed out the ailing Iscor about three years ago with a massive cash injection and a business assistance agreement under which it provided support in return for gradually increasing shares in Iscor. This allocation, as well as additional purchases by LNM, took the company to its current holding of 49 per cent. The acquisition of Iscor will further entrench LNM's position as the second largest steel manufacturer in the world. Analysts said LNM was likely to move quickly to buy up Iscor shares as soon as the Tribunal granted approval, as the company would want to do this before the end of its financial year in June.
Source: IANS
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