Xstrata Said to Weigh Lonmin Offer After Takeover Rebuff

Xstrata Plc (XTA) is considering a revised offer for Lonmin Plc (LMI), the platinum producer that rejected an approach from its largest shareholder, according to two people familiar with the matter.

Xstrata, which owns 25 percent of Lonmin, is sounding out other shareholders’ views on the performance of management and its planned $817 million stock sale to investors, the people said, asking not to be identified as the talks are private. After the discussions, Xstrata may pursue options including a new proposal for Lonmin, or participating in the share sale on the condition that Lonmin agrees to replace senior management, the people said.

Either option would hand greater control to Xstrata, whose Chief Executive Officer Mick Davis is South African, as London- based Lonmin restarts its Marikana mine, where a violent strike and clashes with police have killed about 46 people. Strikes over pay in South Africa (SBK)’s mining industry have also hit firms including Impala Platinum Holdings Ltd. (IMP) and may wipe 0.5 percentage points off the gross domestic product of sub-Saharan Africa’s largest economy, finance minister Pravin Gordhan said this month.

Lonmin said Nov. 9 it had rejected a proposal that it buy Xstrata’s South African platinum and alloys businesses. The plan called for Lonmin to hold a $1 billion share sale that would be fully underwritten by Xstrata, and which would increase the Zug, Switzerland-based company’s stake to 70 percent in a reverse takeover.

Lonmin also rejected a second proposal from Xstrata to support the platinum producer’s rights issue, which is necessary to meet pledges to creditors, on the condition that Lonmin’s executive directors are replaced, Lonmin said. Xstrata would have provided management services to Johannesburg-based Lonmin under the deal. Lonmin shares rose 6.1 percent 483.2 pence by the close in London, valuing the company at about 981 million pounds ($1.6 billion).

An Xstrata official declined to comment. The firm on Nov. 9 said it was concerned about management and “longstanding operational problems” at Lonmin. Lonmin said in an e-mailed statement it declined to comment on market speculation.

The walkout at Marikana, which lasted from Aug. 10 to Sept. 20, cut about $170 million from the mine’s output before workers accepted pay increases of between 11 percent and 22 percent. Labor unrest in South Africa has since spread to manufacturing and agriculture, with vineyards near Cape Town now experiencing strikes.

To contact the reporters on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net

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