Xstrata Raises Lonmin Stake, Abandons Takeover

123jump.com Staff
01 Oct, 2008
New York City

Xstrata after facing difficult financing conditions abandons its Lonmin takeover offer at

[R]9:40AM New York – Xstrata abandons its Lonmin takeover efforts but raises its stake in the company to 25%.[/R]

Xstrata plc, abandoned its takeover of Lonmin as credit markets remain tight and it seeks higher offer. Xstrata in a filing today said that it has increased its stake in the platinum miner to 24.9% after it acquired additional 14.2% of Lonmin’s shares.

Xstrata acquired 22.232 million shares at a price £19.79 a share for a total consideration of £440 million. In all, Xstrata has acquired 38.93 million shares for £991 million or $1.77 billion. The today’s purchase will be funded with debt facility that the company has with banks which were renegotiated for $5 billion.

Xstrata announced on August 6 that it may make a bid for Lonmin and the Takeover Panel of UK ruled the company to make a firm offer or clarify its intentions on or before October 2. The company had earlier announced to acquire Lonmin at 3,300 pence a share. According to UK takeover rules Xstrata can make an offer to purchase Lonmin at 3,300 pence or higher price within six months or at a lower price within a year.

Mick Davis, chief executive of Xstrata said, “The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata, in respect of the requirement in the proposed financing terms to refinance a substantial portion of the debt funding within 12 months.”

Xstrata, Zug, Switzerland based mining company and listed on London and Swiss SWX Exchanges is one of the largest miners of coal, copper, nickel, zinc and vanadium.

Xstrata in London trading increased 6% to 1,820 pence and Lonmin fell 385 pence or 17% to 1,889 pence.

Lonmin is the third largest platinum miner and operates in the Bushveld complex in South Africa which supplies 77% of world’s platinum. Lonmin reported $705 million of profit at the end of September of 2007 and $396 million at the end of six months period in March 2008 with gross assets of $3.86 billion.

Lonmin lowered its platinum production target for the current year to 725,000 ounces as it battles with work stoppage, safe issues and falling platinum prices.