Kazakhmys raises stakein rival ENRC to 22%

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The Independent Online

Less than a month after Kazakhmys rejected a "derisory" takeover offer from ENRC, the FTSE 100 miner has turned the tables by increasing its stake in its erstwhile suitor, stoking fresh speculation about the forging of a Kazakh national mining champion.

Kazakhmys yesterday agreed to buy 7.7 per cent of ENRC from the Kazakh state, pushing its holding to 22 per cent and making it the company's single largest investor. In exchange, the state will receive a 15 per cent stake, worth £1.3bn, in Kazakhmys through newly issued shares. The transaction makes the government a reference shareholder in the country two largest companies – after the disposal, it owns 11.7 per cent of ENRC – and leaves the market wondering whether it will try to broker a marriage of the FTSE 100 groups.

Amos Fletcher, an analyst at Cazenove Global Securities, said: "We believe the long-term combination of the two companies is favoured by the government ... This transaction to some extent suggests the government is backing Kazakhmys to bring this about."

Kazakhmys said it had no intention to make a full offer for ENRC, a possibility that would monumentally stretch Kazakhmys financially. ENRC's £17bn market value is more than twice Kazakhmys' £7.5bn value.

Whether some kind of combination does take place will heavily depend on the intentions of the three oligarchs that together control ENRC. Alijan Ibragmiov, Alexander Machkevitch and Patokh Chodiev each own 14.6 per cent of the company.

There is also bad blood between the groups after ENRC's abortive attempt to buy Kazakhmys, with a bid that was well below Kazakhmys's market price.

For Kazakhmys, the share increase could lead to a re-rating of the stock. Having surpassed the 20 per cent threshold, the company will now be able to include a fifth of ENRC's earnings on its balance sheet.

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