Brussels looks set to block Lonrho-Gencor merger

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The Independent Online

Speculation is mounting that Brussels will block the planned link up between Lonrho and South African group Gencor to create the world's second biggest platinum producer.

It is thought that the European Commission's mergers task force has come down against the merger and that its decision was backed by a meeting on Tuesday of an advisory committee consisting of competition policy officials from member states.

Lonrho sources indicated yesterday that both bodies had blocked the merger, which would create a grouping with production of about 1.6 million ounces of platinum a year.

However, that may not be entirely bad news for Lonrho as it could ease the way for the world's biggest platinum producer to increase its stake in Lonrho's mining operations when the planned demerger from the group's trading and hotels business takes place this summer.

Anglo-American already owns 10 per cent of Lonrho and is thought to want to raise its stake to just under 30 per cent.

Last month Anglo snapped up Tiny Rowland's 5.9 per cent stake in Lonrho for pounds 91m and secured first right of refusal to buy chief executive Dieter Bock's 18.5 per cent stake should he decide to sell.

Lonrho refused to comment on suggestions that the South African group was now seeking to secure a fixed price option on the Bock stake though analysts believe he would sell out if offered pounds 2.50 a share.

But analysts said it was clear that Anglo was intent on emerging as a significant minority shareholder in Lonrho's platinum, gold and coal mining operations when they are demerged from its trading and hotel businesses this summer.

"It would be very happy, when the break-up occurs, to own about 30 per cent of the mining companies," said one Johannesburg-based analyst.

The main attraction for Anglo is Lonrho's 41 per cent stake in Ashanti Goldfields but it also has a majority stake in coal producer Duiker Exploration and is merging its platinum interests with those of Gencor of South Africa.