Gencor denies offering to buy Lonrho stake

THE mystery deepened yesterday over the background to Roland 'Tiny' Rowland's decision to sell a key 6.6 per cent stake in Lonrho from his own personal holding to the German businessman, Dieter Bock.

Gencor, the South African mining group, rejected suggestions by Lonrho that it had offered to buy out Mr Rowland's entire shareholding of 92 million shares, representing about 14 per cent of the equity, at a premium price.

Peter Cronshaw, who deals with investor relations for Gencor, said yesterday: 'I know that there was an approach to Lonrho in the days of Derek Keys (Gencor's former chairman) but that is old news rather than new news.'

Two years ago Gencor was in talks with Lonrho about possible joint ventures, but emphatically denied that it intended to merge with Lonrho.

In his letter to shareholders last week, Mr Rowland said Gencor, which has a 27 per cent stake in Lonrho's Western Platinum mine, had been interested in buying out the balance of the shareholding. He said the ideas put forward by Gencor would have led to Lonrho 'sooner rather than later' becoming South African controlled. 'This was not in line with Lonrho's thinking,' Mr Rowland said.

Mr Cronshaw said yesterday that Brian Gilbertson, who took over as chairman of Gencor at the beginning of the year, had met Lonrho some months ago. 'I am not aware that anything serious was discussed. We were reviewing the business opportunities. We are interested in the mining operations but we have never been keen on a full takeover of Lonrho because of the stigma attached to it.'

Gencor does not own shares in Lonrho.

Separately, it has emerged that large investors will shun the pounds 170m rights issue, launched last week and partly underwritten by Mr Bock. Several institutional investors say they will not be subscribing for shares in the issue, which are being offered at 85p, 12p above yesterday's closing market price of 73p.

This suggests the issue will be undersubscribed, leaving Mr Bock to acquire a stake of up to 20 per cent. In this case Lonrho would raise just pounds 80m rather than the full amount.

The issue was launched as part of a fund-raising programme, which also includes the pounds 124m sale of VAG, a Volkswagen dealer, and a further pounds 300m to pounds 400m of disposals, most of which have yet to be identified.

Institutional investors in Lonrho include Fidelity with 9.7 per cent, Phillips & Drew Fund Management with 5 per cent and Chase Manhattan and South Africa Mutual Life with 3.1 per cent each.

A number of others, principally those who run funds designed to perform in line with the FTA All Share index, have smaller stakes. Genting, the Malaysian casino operator, holds a further 7.3 per cent of Lonrho.

Analysts said the lack of interest in the rights issue meant that the nil-paid shares - shareholders who do not want to take up their rights would normally try to sell these - would be almost worthless when dealings start on Friday.