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.”
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 closed up 2 percent at 1,525 pence at 4:30 p.m. in London today, giving it a market value of 3.1 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.