Xstrata Plc (XTA)’s criticism of Lonmin Plc (LMI)’s management is “opportunistic” and its proposal to back a rights offer in exchange for executive control “unconscionable,” Lonmin Chairman Roger Phillimore said.
The management team has done a “remarkable” job in the past three months, Phillimore said today in a phone interview. Xstrata, which owns about 25 percent of Lonmin, said Nov. 9 the platinum producer has longstanding operational problems and doesn’t have the management to ensure a sustainable future.
The sniping follows a six-week strike at Lonmin that cut its share price by 18 percent and prompted the company to plan a $817 million share sale to buoy finances. The Johannesburg-based metal producer has rejected two Xstrata proposals to bolster its balance sheet in the past two months, saying they’d effectively transfer control to Xstrata without an appropriate premium.
Lonmin appointed Head of Finance Simon Scott as acting chief executive officer in August after announcing that CEO Ian Farmer was hospitalized with a serious illness.
“The board recognizes it has to make permanent appointments and that’s a process that has started,” Phillimore said. “The outside world needs to know who this company is being run by, and how it is being run.”
Xstrata is considering a revised offer for Lonmin, two people with knowledge of the matter said yesterday. The Zug, Switzerland-based company, led by Mick Davis, is sounding out other shareholders on the performance of management and may participate in the share sale on the condition that Lonmin agrees to replace senior management, the people said.
“We have attempted to engage Lonmin’s board and management team on various occasions over the past two years on how to restore profitability and create a more sustainable business,” Xstrata said today in an e-mailed statement. “That is in no way opportunism.”
Lonmin’s relationship with Xstrata is “perhaps a little less warm than it was,” Phillimore said today.
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