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Anglo gives authorities assurances on Kumba April 7, 2003 By Ann Crotty Johannesburg - Anglo American has assured the Competition Commission that there were no control implications attached to its recent acquisition of a further 10.5 percent stake in Kumba Resources. Anglo was responding to an approach by the commission aimed at clarifying Anglo's decision to exercise an option to acquire 10.5 percent of Kumba while the competition authorities were considering Anglo's bid to exercise a number of options that would give it "material influence" over Africa's biggest iron ore mining firm. When Anglo released its results in early March it said that it had acquired a 20.1 percent stake in Kumba and that a right to acquire a further 10 percent was subject to approval from the Competition Tribunal. Anglo acquired an initial 9.6 percent stake in Kumba on the open market. It now appears that it subsequently acquired options on three further blocks of Kumba shares that would take its holding to 34.9 percent. One of these was a 10.5 percent holding acquired through its option to purchase Stimela from Israeli businessman Benny Steinmetz. A second block was an option on 10 percent of Kumba shares that were held by Deutsche Bank. There is uncertainty about the third block other than that, if exercised, it would take Anglo's stake from 30.1 percent to 34.9 percent. In June last year Anglo notified the competition authorities of its intention to exercise these various options. Although the options would only take Anglo's stake to 34.9 percent it explained to the commission this would result in it securing "material influence" over Kumba and therefore it felt it had to notify the commission. This transaction received unconditional approval from the Competition Commission and was expected by many to get a clear run in the tribunal. But an application by the Industrial Development Corporation (IDC) to participate in the tribunal's investigation into the transaction has slowed down the process. Anglo has challenged the IDC's right to be involved and this has resulted in a six-month delay in the tribunal's proceedings . Faced with this uncertainty, Anglo appears to have exercised one of the three options that was part of the transaction before the tribunal. In early March the mining giant announced that it had exercised the option it held over the Stimela-related 10.5 percent stake in Kumba. An Anglo spokesperson said last week that the decision to exercise the option was based on an advisory opinion that the Competition Commission had sent to Anglo in response to an approach it made. Such an opinion is not binding on the commission and was based on information that Anglo provided to the commission. Anglo's desire to complete the Stimela transaction is believed to relate to the carrying costs of the unexercised option and to the fact that the option may soon expire. It is likely to be some months before the tribunal decides on Anglo's acquisition of the 10 percent stake in Kumba it will acquire through the Deutsche Bank options. It is unclear what Anglo will do - or might be required to do - with its current 20.1 percent holding if the tribunal prohibits that transaction . Anglo may decide it is pointless to hold such a small stake in a company that needs extensive investment. It may then sell the shares on the market. According to analysts Anglo's tactics in relation to Kumba have been influenced by the attitude of the authorities to LNM in its acquisition of a significant stake in Iscor. LNM was given the all clear by the competition authorities on the understanding that its stake in Iscor would remain under 50 percent, that it would not have a majority of directors on the Iscor board and that it would not exercise control of the local steel maker. LNM subsequently obtained approval from Iscor shareholders to increase its stake to 49 percent. The differences appear to be that at no stage did LNM say that it would have a material influence over Iscor and the IDC did not get involved.
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