Mittal wins time in takeover bid

Thursday, 23 January 2003, 08:00 Hrs
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JOHANNESBURG: London-based steel magnate Lakshmi Mittal has won a three-week reprieve in his bid to ultimately take control of South Africa's largest steel producer Iscor.

Amid great resistance from minority shareholders to an offer by LNM, a special meeting of Iscor shareholders was Wednesday adjourned to February 12.

The meeting was called for shareholders to vote on an initial partial offer by LNM which would have raised the company's stake in Iscor to 47 per cent, paving the way for it to take control of the former state-owned steel giant.

Gaining a majority holding would then have become fait accompli for LNM, which will get more shares from Iscor next year in terms of a Business Assistance Agreement that has seen LNM turn Iscor's fortunes around in the past two years.

But four major financial institutions here, collectively representing the bulk of Iscor minority shareholders through mainly pension fund investments, resisted the offer by LNM, even though the Iscor Board had recommended approval of the waiver requested by LNM.

LNM offered a substantial premium on the shares it was prepared to buy from minority shareholders, subject to their approving the waiver of a local securities exchange regulation that would compel LNM to make a full offer to minorities if its stake in Iscor exceeded 35 per cent.

In an attempt to quell the dissent about liquidity of Iscor by this move, LNM Friday made a further undertaking that it would make a full offer to Iscor minority shareholders if it reached a 60 percent shareholding, again subject to approval of the waiver.

But some investors still refused to accept this, resulting in expectations that LNM would have lost the vote at the meeting Wednesday.

At the start of the meeting, LNM representatives, led by Aditya Mittal, requested and secured the adjournment to allow time for further negotiation with minority shareholder representatives.

Analysts said LNM had been able to buy time in which it could renegotiate an offer, which is considered fair by all minorities. They said either an increase in the price of the offer or the 60 percent offer being unconditional is likely to be accepted by minority shareholders.

LNM came under fire earlier this week after it threatened to withdraw from South Africa if it did not win the waiver vote.

The head of the Shareholders' Association, David Sylvester, said the threat by LNM was "shocking corporate governance."

"This is not the way to do business," he said.

With many investors here incensed by the threat, it could only have antagonised those intending to vote against the waiver further, rather than win them over, so LNM should be thankful for the reprieve, said an analyst.

"LNM has done more harm than good to its reputation. It has made itself look like a petulant schoolyard bully who will resort to threats when it doesn't get its way," analyst Max Gebhardt wrote in the Business Day.

LNM Vice-Chairman Aditya Mittal said after the meeting it was clear from discussion with minority shareholders that there were questions they were concerned about. But he was confident that an agreement would be reached in the best interests of these shareholders, Iscor and LNM.

Iscor chairman Khaya Ngqula said the fact that shareholders had supported the adjournment suggested that the main players were keen to engage in discussions with LNM to resolve the issue.

Ngqula said LNM had said in principle that it wanted to remain in South Africa.

"We hope they keep their word," he added. "LNM has already invested about two billion rands in Iscor. It will not be easy to withdraw that sort of investment."

LNM partnered with Iscor when the former state-owned company was privatised and split into the Iscor steel arm and the mining arm Kumba. LNM's cash injection, technical assistance, and improved access to international markets has turned the fortunes of the ailing company around.
Source: IANS
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