Bloomberg News

ArcelorMittal S. Africa Says Empowerment Deal Still ‘a Priority’

September 26, 2011

Sept. 27 (Bloomberg) -- ArcelorMittal South Africa Ltd. said finding a black empowerment partner remains a priority, after failed talks to sell a 26 percent stake to a group of black investors, including a son of President Jacob Zuma.

The steelmaker planned to sell the stake, in a transaction valued in August 2010 at 9.1 billion rand ($1.1 billion), to comply with black economic empowerment legislation, laws designed to compensate black South Africans for discrimination during apartheid. The negotiations lapsed after the parties were unable to agree to an extension, the company said in a statement to the stock exchange in Johannesburg yesterday.

The proposed deal with the Ayigobi Consortium was criticized when it was announced last year by five of the steelmaker’s largest minority shareholders, including the Public Investment Corp., the biggest South African pension fund manager, and Sanlam Ltd. Empowerment “remains a priority for us as a company,” Themba Hlengani, an ArcelorMittal South Africa spokesman, said yesterday by mobile phone.

The transaction hinged on the resolution of disputed rights at Sishen, Africa’s largest iron-ore mine. Imperial Crown Trading 289 (Pty) Ltd., whose owners form part of Ayigobi, was awarded part of the prospecting license for the mine and deposit by the government after the steelmaker missed a deadline to renew its rights.

ArcelorMittal South Africa, a unit of the world’s largest steelmaker, offered to buy Imperial for 800 million rand and to include Imperial’s shareholders in Ayigobi in an attempt to regain its Sishen rights.

Duduzane Zuma

Kumba Iron Ore Ltd., which holds the remainder of the Sishen rights, canceled a favorable iron ore supply agreement with the steelmaker when it became aware of the award of the rights to Imperial in February 2010.

Zuma’s son Duduzane, a business partner of Imperial’s biggest shareholder, Jagdish Parekh, would have gained a 12.5 percent stake in Ayigobi through his company Mabengela Investments.

ArcelorMittal South Africa’s buy-out of Imperial would have been canceled if Imperial lost a court case with Kumba, a unit of Anglo American Plc, over the government’s award of the prospecting rights. The argument in that case has been heard and the parties are awaiting a judgment from the North Gauteng High Court in Pretoria.

ArcelorMittal South Africa’s proposed purchase of Imperial lapsed Aug. 12 because Imperial shareholders declined to grant an extension in negotiations, Ronnie Mendelow, a lawyer for Imperial, said in a telephone interview.

“We are focused on getting a mining right,” he said. “If we are granted the right, then we are going mining.”

--With assistance from Franz Wild in Johannesburg. Editors: John Viljoen, Alex Devine

To contact the reporter on this story: Jana Marais in Johannesburg at jmarais@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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