LONRHO, the British-based mining conglomerate, is thought to be planning a takeover bid for JCI of South Africa.
The company, headed by Sir John Craven, chairman, and Nick Morrell, chief executive, is understood to have made an informal approach to Mzi Khumalo, JCI's chief executive, in recent days. Lonrho is being advised by Deutsche Morgan Grenfell while JCI has used SBC Warburg.
Rumours of potential activity were circulating in the Johannesburg Stock Exchange late on Friday and JCI shares closed 2p higher in London at 250p, having bounced sharply off their 1997 low of 198 1/2 p in recent weeks. At 250p, the company is valued at ?385m. Meanwhile, Lonrho shares eased 1 1/2 p on Friday to 89p to value it at ?707m.
The Lonrho approach follows the recent announcement that JCI plans to swap its gold interests with Anglo American, the South African mining giant, in return for Anglo's 28% stake in Lonrho.
If this deal goes through and Khumalo also succeeds in his plans to sell JCI's Tavistock coal-mining interests in South Africa to Lonrho's 61%-owned Duiker Mining subsidiary for between ?180m and ?200m, JCI will be left as a virtual shell company whose main assets will be some cash, its Lonrho stake and a small chrome operation. Earlier this year Khumalo floated the idea that JCI bid for Lonrho, but with its market value at ?385m and Lonrho's at ?707m such a proposal would now be far-fetched.
Thus a takeover by Lonrho could make sense to both sides. The British company, in buying JCI, would effectively buy in 28% of its share capital. Thus for the first time in decades it would be able to present itself to international fund managers as a conventional professionally managed company without the presence of a large and potentially disruptive shareholder on its register.
The bulk of Anglo's current 28% stake, which shortly will be transferred to JCI, was originally owned by Tiny Rowland, Lonrho's chief executive for most of the past four decades.
These shares then passed to Dieter Bock, the German financier who was originally billed by Rowland as his chosen successor but then became his bitter adversary in a battle for control. Bock, having begun the rationalisation programme being completed by Craven and Morrell, sold out to Anglo earlier this year.
Meanwhile, Khumalo is likely to be offered a seat on the Lonrho board and the opportunity to contribute to its expansion as a big African mining business.
Lonrho's spread of activities will include an enlarged Duiker coal company, big platinum interests through Eastern Platinum and Western Platinum and a 41% stake in Ashanti Goldfields of Ghana, Africa's biggest gold company outside South Africa.
Before any corporate moves with JCI, Craven and Morrell are pushing ahead with various disposal moves aimed at raising cash. Lonrho's Dutton-Forshaw motor dealership is likely to be sold in the next few weeks to a venture-capital-backed management buyout team for about ?100m, including its debts.
At the same time the complex negotiations to sell nine of Lonrho's ten Princess hotels to Prince Al-Waleed bin Talal, the Saudi Arabian investor, for between ?220m and ?250m are said to be close to conclusion after various delays. Al-Waleed is funding the purchase using bank debt and this has extended the due-diligence process. Some 212 legal documents are involved.
Lastly, Lonrho is working on the demerger of its extensive African trading businesses into a separate quoted company. It is expected that Craven will be in a position to announce shortly that the demerger will go ahead in the spring or early summer of next year.
