Sibanye keeps option to increase Lonmin offer against rival bid

Image courtesy of Sibanye-Stillwater

Sibanye Gold Ltd. reiterated that its increased offer for Lonmin Plc is final, but kept its option open to sweeten the deal for the platinum producer should a rival bid emerge.

While its current offer “is final and will not be increased,” the company “reserves the right to set aside the no increase statement if a competitive situation arises,” Sibanye said in a statement Monday. James Wellsted, a spokesman for the Westonaria-based miner, declined to comment further.

The all-share deal has come under scrutiny as Lonmin returned to profit after years of losses

“If somebody comes in with a higher bid, they are saying they will increase the offer,” said Rene Hochreiter, an analyst at Noah Capital Markets Ltd. “The problem is I don’t see anybody coming in with a competitive bid.”

While the acquisition is key to the expansion strategy of Sibanye Chief Executive Officer Neal Froneman, the all-share deal has come under scrutiny as Lonmin returned to profit after years of losses. South Africa’s Public Investment Corp., which holds 30% of Lonmin, is troubled by the drop in Sibanye’s value since the deal was made public in December 2017, according to a person familiar with the matter.

Sibanye last month increased the share ratio it’s offering to Lonmin investors after metal prices rose, but the value of the deal remains lower than when it was first announced. The purchase needs the backing of 75% of Lonmin shareholders when they vote later this month.

Opposing deal

Sibanye shares climbed 1.2% as of 11:26 a.m. in Johannesburg, bringing this year’s gain to 15%. Lonmin fell 1.7%.

James McWilliams, an independent investor and former hedge fund manager who says he owns more than 1 million Lonmin shares, is urging fellow shareholders to block the transaction unless the offer is raised. Should the deal be approved, he plans a legal challenge.

“I am definitely voting against this deal and am prepared to follow my appraisal rights if necessary and take the matter court if a satisfactory offer is not achieved,” McWilliams said by phone. “Lonmin’s cash flow has improved significantly with the increase in platinum-group metal prices and shareholders have not enjoyed any of these benefits.”

(By Felix Njini)