LONRHO shares retreated yesterday as a shocked and confused City began

to absorb the news that Tiny Rowland was halving his 15% stake and that

the company was making a #169m rights issue above the market price at

85p.

The shares fell from the overnight 79p to 75p on widespread

disillusionment and also that the debt level at #947m was about #100m

worse than had been the case at the annual meeting in March when

shareholders were told there were going to be substantial reductions.

Since then, disposals have included that of George Outram, owner of The

Herald and Evening Times, for #74m to a management buyout team and

institutions.

Analysts were somewhat puzzled as to why German businessman Dieter

Bock is offering a substantial premium over the market price at 115p a

share. This is not being offered to other shareholders. In all, he is

paying Mr Rowland #50m for 43.5 million of his 92 million Lonrho shares

and with options over most of the remainder which are exercisable in

three years time when Mr Rowland will stand down. In addition, he is

underwriting half the rights issue which could result in his ending up

with between 9% and 19% of the international trading conglomerate.

Mr Bock is obviously prepared to pay a significant premium to gain

effective control in just over three years time without having to

consider other shareholders.

He may have been influenced in his negotiations by the comparatively

high breakup value put on the company by analysts even at a time of

depressed prices for metals -- including a near half stake in the

Ashanti gold mine which is a world class operation -- soft commodities

and general industry.

Rather than making a full bid in due course, it is possible that he

may try to buy out some of the juicier assets such as German property or

mining. The platinum interests could have a present day value of about

#850m although a better metal price could easily put them over the

#1000m mark.

Mr Rowland emphasised in a letter to shareholders that Mr Bock is 22

years younger than himself. It was suggested that Lonrho had tired of

negotiating with South Africa's Gencor over the sale of various assets

including the all-important Western Platinum. Indications from the Cape

are that Gencor had hoped to pick these up at rock bottom prices as

Lonrho's debt position deepened and it became an ever more hard pressed

seller.

Instead of putting in a blockbuster bid which would have had Fidelity

Investments with a 10% stake falling happily into its arms, Gencor has

now found itself outmanoeuvred by Mr Bock. So Johannesburg is now likely

to become a net seller of Lonrho shares as it sees bid prospects ebb

away.

Mr Bock made his money in construction and through the Adventa

investment group. He indirectly has a substantial stake in Tilbury

Douglas through the stakes held by German construction giant Philipp

Holzmann.

Another puzzle is the underwriting of the other half of the rights

issue. The City will certainly spurn it as institutional investors are

rather tired, to say the least, of Lonrho and will refuse to put money

at risk particularly at 10p above the current market price.

So it is possible that 8% shareholder Genting of Malysia could move

into place. It has a good record in recent years in the leisure industry

and would certainly be interested in Lonrho's Princess Hotels in the

Caribbean and even, conceivably, in the Metropole Hotels in Britain in

which Libya paid #177m for a one third stake in June.