Sibanye offer: Is Lonmin nuts to hold out for a sweeter deal?
Shareholders get sniffy about the all-share bid, and decide on May 28 whether going it alone is worth it
What a difference 17 months make in the way the Sibanye-Stillwater all-share bid for platinum miner Lonmin is seen by some in the market.
Some shareholders and analysts now say the Sibanye offer is far too low. They urge Lonmin’s largest investor, the Public Investment Corporation (PIC), which manages state employees’ pension funds, to use its near-30% stake to force a higher offer from the powerful gold and platinum group metals producer.
You can’t fault shareholders for wanting more after the years of agony they’ve experienced at Lonmin. They have seen three rights issues in rapid succession, the dramatic erosion of its capitalisation and value, and a near-death experience as it violated its debt covenants in 2017 – which lenders didn’t enforce because of the Sibanye bid in December of that year.
The long time to secure competition commission and then completion tribunal approval by November, only to be delayed by an appeal by the Association of Mineworkers and Construction Union (Amcu) until May 17, has skewed some investors’ perceptions of the value of the deal. Just 17 months ago it was seen as the lifeline Lonmin so desperately needed.
No other company publicly stepped forward and said they’d take over the beleaguered company and save its 30,000 employees at mines, concentrators, smelters and refineries.
Sure, Sibanye saw a fantastic bargain. Lonmin was on its knees and it stepped in to buy some fantastic assets, most notably the smelters and refineries, a rare and valuable processing unit.
No matter what Lonmin’s early-stage recovery looks like, will the PIC and other shareholders be willing to put more money into the company? Will banks lend reasonably priced money to Lonmin without onerous covenants?
It’s highly unlikely. Without Sibanye’s money Lonmin cannot do a lot more than sustain production without any investment in its growth projects. That is a certain death sentence for Lonmin and its 30,000 employees.
It is down to shareholders on May 28 to decide if Lonmin is a viable standalone business or whether the combination with Sibanye will give its assets the best chance of a long-term future.