What a difference 17 months make in the way the Sibanye-Stillwater all-share bid for platinum miner Lonmin is seen by some in the market.
A number of shareholders and analysts are now saying the Sibanye offer is far too low and are urging the largest investor, the Public Investment Corporation (PIC) — which manages state employees’ pension funds — to use its near-30% stake to force a higher offer from the powerful gold and platinum group metals (PGMs) producer.
You can’t fault shareholders for wanting more after the years of agony they’ve experienced at Lonmin, three rights issues in rapid succession, the dramatic erosion of its capitalisation and value and the near-death experience as it violated its debt covenants in 2017 which lenders didn’t enforce because of the Sibanye bid in December that year.
The long time to secure Competition Commission and then Competition Tribunal approval by November, only to be delayed by an appeal by the Association of Mineworkers and Construction Union (Amcu) until May 17, has skewed some investors’ perceptions of the value of the deal that 17 months ago was seen as the lifeline Lonmin so desperately needed.
No other company publicly stepped forward and said they’d take over the beleaguered company and save its 30,000 employees at mines, concentrators, smelters and refineries.
Sure, Sibanye saw a fantastic bargain. Lonmin was on its knees and it stepped in to buy some fantastic assets, most notably the smelters and refineries — a rare and valuable processing unit.
The question is, no matter what Lonmin’s very early stage recovery looks like, will investors such as the PIC and other shareholders be willing to put more money into the company? Will banks lend reasonably priced money to Lonmin without onerous covenants? It’s highly unlikely.
Without that money Lonmin can do not a lot more than just sustain production without any investment in its growth projects. That is a certain death sentence for Lonmin and its 30,000 employees.
It really is down to shareholders on May 28 to decide if Lonmin is a viable standalone business or whether the combination with Sibanye will gives its assets the best chance of a long-term future.
Strike obscures how well Dis-Chem actually did
Health and beauty retailer Dis-Chem Pharmacies had a difficult year, as a nearly five month long strike shaved up to R76.4m off its profits in the year to end-February.
The strike, which started in November affected operations at three of its four distribution centres and involved 2,300 of its 15,000 staff, who were affiliated to the National Union of Public Service and Allied Workers (Nupsaw).
The group’s labour issues forced it to relocate some of its staff, saw it lose sales and added to its security costs.
Despite the length of the strike, none of Nupsaw's demands were met, such as a minimum wage of R12,500 and annual increases of 12.5% guaranteed for the next three years.
The strike was a blow to Dis-Chem but it also obscured how well the group had performed for the period.
Although the labour action had cost it R76.4m, which equated to about 10% of its net profit of R765m for the period, net profit was still up 9.5% on the corresponding period’s R698m.
If the cost of the strike is stripped out, Dis-Chem somehow still managed to push up earning by a decent amount in a market where most other retailers were feeling the pain of a slow economy.
This is a notable achievement considering the difficulty the sector is in. While the outlook for retailers remains murky, Dis-Chem is somehow still getting consumers through its doors.
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