Lonmin minority shareholders are urging the Public Investment Corporation (PIC) to reject the current terms of Sibanye-Stillwater’s takeover bid, which they believe is inadequate.
The PIC, which has a 29.3% stake in the London-registered and listed platinum group, is the single largest shareholder and the only one that could block the deal, which requires 75% shareholder approval. The PIC is one of the largest investment managers in Africa, with assets of about R2.1-trillion.
Deon Botha, head of corporate affairs at the PIC, would not be drawn on the issue. “As a matter of principle the PIC does not publicly discuss its views on investments before a decision has been made,” Botha told Business Day on Friday.
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Earlier in the day Bloomberg quoted unnamed PIC sources expressing concern about the erosion of the value of the deal and said a decision on whether to back the deal will be taken on Monday.
'Totally inadequate'
Anton Hugo, an independent mining analyst at Prima Research, described as “totally inadequate” the recent slight revision of the bid, in terms of which Lonmin shareholders will receive one Sibanye-Stillwater share for each Lonmin share.
“Because Sibanye shares have tanked, the cash value of the offer has almost halved from £1 when the bid was launched in December 2017 to barely 60p per Lonmin share today. During the same time the prices of palladium and rhodium have rocketed, increasing Lonmin’s operating profit more than fivefold to $219m from $40m,” Hugo said.
It is a wonderful deal for Sibanye-Stillwater, he said, but it makes no sense for Lonmin shareholders. He believes a more appropriate valuation would be £1.50-£2 a share.
James McWilliams, who holds Lonmin shares in a hedge fund he manages, said given developments over the past 18 months it makes sense for the PIC to use its shareholder muscle to extract a more appropriate value. McWilliams points out that the substantial improvement in the price of platinum group metals provides the PIC with an opportunity to get an improved return from its long-term investment in the mining company.
The PIC ended up with a 29.3% stake in Lonmin at a cost of R21.40 per share after underwriting a $407m rights issue in November 2015. If the currently priced transaction proceeds, the PIC will be down R820m on that underwriting exercise. The asset manager, which also has a 10.3% stake in Sibanye-Stillwater, will emerge with a 12.2% stake of the combined entity if the deal is implemented on current valuation terms.
Ahead of any decision the PIC might make on Monday, Sibanye-Stillwater said it has no intention of making any further revisions. At the end of April it announced an increase in the exchange ratio, from 0.967 Sibanye-Stillwater shares for each Lonmin to a one-for-one exchange.
The Lonmin directors have unanimously recommended that shareholders vote in favour of the transaction and have no plans to seek an improved offer.
Wendy Tlou, head of communications and brand at Lonmin, reminded Business Day on Sunday that the shareholder circular “clearly sets out the view of the Lonmin directors in respect of the Sibanye offer”. The circular states the directors, who have been advised by Gleacher Shacklock, JPMorgan Cazenove and Moshe Capital, “consider the terms of the transaction to be fair and reasonable”.
If the current deal is finalised, Lonmin’s top management will pick up an immediate R130m payout as all 9.2-million share options held by the executives will vest.
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