Lonmin vulnerable to takeover bids
• Sibanye seen as most likely suitor for cash-burning platinum major after share price plummets more than 50%
For Lonmin shareholders, it must be the same depressing ride they took a few years ago when the company’s share price dwindled to almost nothing, but for a potential suitor this is a fresh chance to take over the world’s third-largest platinum producer.
For Lonmin shareholders, it must be the same depressing ride they took a couple of years ago, when the company’s share price dwindled to almost nothing, but for a potential suitor, this is a second chance to take over the world’s third-largest platinum producer.
Sibanye Gold is the most likely bidder for Lonmin, but it made no move in 2015 when Lonmin’s shares fell by 98% ahead of a massively dilutive rights offer to raise $373m after costs to urgently prop up the balance sheet.
The more than 50% decline in the value of Lonmin’s shares over the past 52 weeks puts the company back in play.
The surprise resignation of well-regarded chief operating officer Ben Moolman this week adds to the negative perception, with analysts warning it was a sign of trouble within the firm.
Lonmin warned in the first quarter it was spending more than it was earning.
“C-level (executive) resignations at Lonmin have in the past presaged bad news, so Moolman’s resignation (effective April 5) — ostensibly ‘for personal reasons’ — is not an encouraging sign,” said UK-based Shore Capital’s Yuen Low.
LABOUR WOES
Another analyst pointed out the smelting and refining operations alone were worth more than Lonmin’s R4.3bn market capitalisation, but it would be a brave CEO to take on the troubles at Lonmin and push through the necessary solutions.
“There is a very difficult labour environment, with [low] productivity and absenteeism, the threat to mining rights because it hasn’t built houses, and social issues around the mine. The workforce needs to be smaller.
“How is another owner going to persuade the government and unions to buy into that after Lonmin has already cut 6,000 jobs?” asked the analyst, who declined to be named.
One industry figure said at least 10,000 more jobs had to be cut or Lonmin “will not survive”. Lonmin’s workforce of 25,000 dwarfs the 14,000 at Sibanye’s similar-sized Rustenburg mines. An acquirer would have to cut jobs, but would find it nearly impossible to get competition approval for such blood-letting
Sibanye CEO Neal Froneman has not deviated from his 2016 message that Sibanye will make one more platinum deal in SA to give it mine-to-market capacity. This means it must buy smelting and refining operations.
A senior industry figure said talks between Sibanye and Lonmin were well advanced when Sibanye announced the $2.2bn Stillwater Mining bid in December 2016. It could be that Sibanye, foreseeing Lonmin’s difficulties, was biding its time to launch a bid for a company abandoned by its investors.