Europe vetos Lonrho platinum merger

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The Independent Online
The European Commission has emphatically rejected the proposed $1.9bn (pounds 1.26bn) merger of the platinum interests of Britain's Lonrho and Gencor of South Africa, and warned that it would block any further move to restrict competition in the industry.

The EU's competition directorate said the combination would have left two groups dominating the platinum market, controlling 28 per cent of the market, with Anglo American Platinum, part of the eponymous South African mining giant, holding 35 per cent.

Tiny Rowland, Lonrho's ousted chief executive, welcomed the decision. A spokesman said: "It is very good for shareholders because it was a bad deal. Now the board can try again and enhance shareholder value."

But the European veto is a blow to the current management of both companies. The blocked deal involved folding cross-shareholdings in South Africa's Eastern and Western Platinum groups into Gencor's Impala Platinum to create a group to rival Anglo American's Rustenberg Platinum operation. It comes just ahead of the proposed demerger later this year of Lonrho's mining interests, which Anglo is expected to dominate. Earlier this month it took an option over the 18.4 per cent held by chief executive Dieter Bock, which could give it just under 30 per cent of the group. That was seen as giving Anglo effective control over Lonrho's mining side after the demerger.

But the EU indicated that any move by Anglo on Lonrho's platinum interests would also meet a frosty reception.

Competition Commissioner Karel Van Miert said the Lonrho-Gencor merger "clearly created a duopoly able to influence, in a very considerable way, market and prices". The veto, only the fifth since the Commission assumed its competition powers in 1990, sent "a clear signal'' that the Commission wants to keep three companies in the platinum market, Mr Van Miert said. Any attempt by Anglo American to take control of Lonrho would create "a similar problem'' to the proposed Gencor-Lonrho alliance and would therefore probably be blocked, he added.

Michael McMahon, chairman of Impala Platinum, said they would appeal against the Commission's decision. "The Commission has ignored compelling evidence that this merger is based on the soundest competitive rationale", he said.

Mr Bock said he was "puzzled" by the decision, given that the merger would have had very little effect on European consumers. Lonrho shares fell a further 0.5 pence to 197.5p. Although Lonrho and Gencor are likely to look at ways of restructuring the deal to obtain approval, Mr Van Miert indicated he could see no way for any similar merger to go ahead.

About a fifth of all platinum sales take place in the EU, giving the Commission a say in what happens in the industry, Mr Van Miert said. The decision was taken with the "sympathy'' of the South African government.