Anglo Sells Its Scaw South African Unit for $430 Million

Anglo American Plc (AAL), which controls the world’s biggest platinum producer, agreed to sell steelmaker Scaw South Africa (Pty) Ltd. for 3.4 billion rand ($430 million), completing its divestment from Scaw Metals Group.

Industrial Development Corp., a state lender known as IDC, and a group of Anglo’s partners in the local steelmaker, will buy Anglo’s 74 percent stake, it said in a statement today. The companies include Shanduka Resources (Pty) Ltd., Izingwe Holdings (Pty) Ltd. and Southern Palace Group of Companies (Pty) Ltd., London-based Anglo said.

The sale, which follows that of Scaw companies Moly-Cop and AltaSteel last year, brings Anglo’s non-core asset sales since 2010 to $3.7 billion. The company has sold paper, zinc and sugar assets as it builds iron-ore, copper and nickel mines, betting demand for the materials will increase in China and other expanding Asian economies.

Anglo will effectively settle Scaw’s outstanding net debt of about $320 million, leaving net cash proceeds of about $120 million, JPMorgan Chase & Co. said in a note to clients. The realized price exceeded its estimated net present value of $232 million, it added.

The sale is a “small positive,” for Anglo, Liberum Capital Ltd. wrote in an e-mailed note.

‘Meaningful Role’

The sale will enable “the IDC to play a meaningful role in the strategically important steel industry,” Anglo Chief Executive Officer Cynthia Carroll said in the statement.

The IDC has been investigating setting up a mill since at least 2008 to rival ArcelorMittal South Africa Ltd. (ACL), which produces most of the country’s steel. ArcelorMittal (MT) was found to have charged “excessive” prices by the country’s antitrust tribunal in 2007. At least five investigations are under way by antitrust authorities, ArcelorMittal said Feb. 7.

Scaw South Africa produces steel components for the mining, rail, power, offshore oil and gas, construction, commercial and other industries. The business includes a 50 percent stake in Consolidated Wire Industries, a tie-up with ArcelorMittal, and 31 percent of GSI Lucchini, a venture with Lucchini SpA.

“The IDC endeavors to promote the establishment of domestic-based manufacturing industries, supporting the infrastructure expansion programs” of Eskom Holdings SOC Ltd., the state-owned power utility, and Transnet SOC Ltd., South Africa’s ports and rail company, IDC Chief Executive Officer Geoff Qhena said in the statement.

Shanduka Group, which owns Shanduka Resources, was formed by former politician and labor union leader Cyril Ramaphosa and has interests in coal mines through a venture with Glencore International Plc. (GLEN) Izingwe is led by Sipho Pityana, a board member at AngloGold Ashanti Ltd. (ANG)

Scaw South Africa was valued at 5.3 billion rand in March 2007, according to an Anglo statement at the time.

Anglo was little changed at 2,294.50 pence as of 12:33 p.m. in London, giving the company a market value of 30.5 billion pounds ($49.2 billion).

To contact the reporters on this story: Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net; Carli Cooke in Johannesburg at clourens@bloomberg.net

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

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