Lonmin share price (LMI) jumps 20 per cent as it agrees to £285m takeover by Sibanye-Stillwater
Troubled platinum producer Lonmin today announced it would be taken over by South African miner Sibanye-Stillwater in a deal valuing the company at about £285m.
Lonmin’s share price jumped 21.18 per cent to 77.25p on the news.
Under the deal, each Lonmin investor will receive 0.967 new Sibanye-Stillwater shares for each Lonmin share. Following completion, Lonmin shareholders will hold about 11.3 per cent of the enlarged group.
Sibanye-Stillwater is a Johannesburg-listed precious metals mining group with operations in South Africa, Zimbabwe and the US. Globally, it is a major producer of platinum and palladium.
The board of Lonmin said the deal was in the best interests of shareholders and unanimously recommended they vote in favour of the offer.
“Lonmin has an enviable mine-to-market business with great mining assets, projects and process technology and a resilient workforce. Despite this, Lonmin continues to be hamstrung by its capital structure and liquidity concerns,” said Ben Magara, chief executive of Lonmin.
The embattled miner has struggled with shrinking margins as well as disputes with its lenders and work force, and last month its shares tumbled after it said it would not be able to announce its annual results on time.
Liberum analyst Ben Davis said: “Sibanye have acknowledged that restructuring is necessary, and cost synergies will see a reduction in headcount in 820 people, including 700 in executive functions and closing Lonmin’s head office. But this is largely window dressing, the real gains will be from shaft closures to remove surplus ounces out of the depressed platinum market.
“There maybe some competition concerns, given the concentration of the existing market Lonmin and Sibanye represent 12-15 per cent market share, this would take the market concentration (Herfindahl index) up from 0.18 to 0.21, but given Lonmin’s struggles we expect would largely expect for approvals to get through.”
Neal Froneman, the boss of Sibanye-Stillwater, said the enlarged company would be better able to withstand volatile platinum prices and exchange rates.
“Furthermore, the sizeable combined resource base, with its pipeline of advanced and early stage projects, also offers significant growth and value upside potential under appropriate economic and market circumstances,” Froneman said.
UBS acted as financial adviser to Sibanye-Stillwater on its acquisition.