Sanlam objects to ArcelorMittal deal

[] — Sanlam [JSE:SLM], South Africa’s largest insurer, objected on Friday to a proposed R9.1bn empowerment deal by ArcelorMittal SA [JSE:ACL] to black investors connected to the ruling ANC.

A Sanlam equity analyst and portfolio manager, Shoaib Vajey, said a planned offer of a 26% stake in AcerlorMittal South Africa, a unit of top global steelmaker AcelorMittal, to black investors was not being done in a transparent way.

Sanlam owns a minority stake in ArcelorMittal South Africa.

“In terms of the financial structure of the deal, there is limited economic benefit to the BEE (Black Economic Empowerment) partners,” who include President Jacob Zuma’s son Duduzane, Vajey said.

Local media reported that the RMB Asset Management also was likely to oppose the proposed deal, which has drawn criticism from the powerful umbrella trade union Cosatu.

South African companies must meet government quotas on black ownership if they want to win lucrative government contracts. The BEE programme is designed to widen ownership of the South African economy, which is still mainly in white hands 16 years after the end of apartheid.

An ArcelorMittal South Africa spokesperson said the company could not comment as the planned BEE deal documents had not been issued to its shareholders.

Vajey said the BEE investors to whom ArcelorMittal South Africa wanted to offer a stake also had connections with Imperial Crown Trading (ICT), which earlier this year was awarded a disputed prospecting right over a 21.4 percent stake in the Kumba Iron Ore [JSE:KIO] Sishen Mine.

Complicated deal

The ArcelorMittal South African unit has since offered to purchase ICT in a separate controversial deal.

“They (ArcelorMittal) say this is unrelated to the ICT acquisition, yet all the parties in ICT are sort of reflected in the (new) deal as beneficiaries and key individuals and groups,” Vajey said.

Vajey said ArcelorMittal South Africa had not disclosed how the deal might or might not prejudice minority shareholders in terms of their voting rights and that the steelmaker should defer the deal until some issues were clarified.

An analyst at Vesact Asset Management, Paul Theron, said the deal was complicated because of corporate governance issues raised by some shareholders.

“From a point of view of these minorities, I think if they are not comfortable with the decisions that are being taken, they could … sell their shares (in ArcelorMittal South Africa),” Theron said.