Xstrata Bid for Lonmin Is More Likely After Share Decline, Bernstein Says

Xstrata Plc, the biggest exporter of coal for power stations, is more likely to revive a takeover bid for Lonmin Plc after the platinum producer’s shares declined 30 percent from an April peak, according to Sanford C. Bernstein.

Xstrata is also in a better financial position to restart a bid after cutting the proportion of its debt to assets, Paul Galloway, a senior mining analyst at Sanford, wrote in a note.

The mining company, based in Zug, Switzerland, abandoned a hostile bid for Lonmin in October 2008 after a plunge in metal prices. Xstrata Chief Executive Officer Mick Davis said in December that his company, which still owns a quarter of Lonmin, doesn’t want to remain a minority investor. Xstrata spokeswoman Pam Bell declined to comment when contacted by Bloomberg today.

“The possibility of Xstrata rebidding for Lonmin has increased,” Galloway wrote. Xstrata “is becoming rapidly de- geared,” he said.

Shares in Lonmin, the world’s third-largest platinum producer, were “much higher” when Xstrata acquired its stake than they are now, “which surely is giving Mick Davis food for thought,” Ambrian Capital Plc said in a note.

Xstrata offered 3,300 pence a share, or 5 billion pounds ($7.7 billion) for Lonmin in August 2008. Lonmin traded at 1,501 pence at 10:15 a.m. in London today, giving it a market value of 3 billion pounds.

Operational improvements must also make Lonmin a more attractive target for Xstrata, RBC Capital Markets said in a note dated yesterday.

Xstrata also dropped a bid for Anglo American Plc, which controls the world’s largest platinum producer, in October.

To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net

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