Lonmin surges as it agrees £285m Sibanye-Stillwater takeover

Lonmin shares rose sharply on Thursday after the platinum miner agreed to be taken over by South Africa's Sibanye-Stillwater in an all-share deal that values the group at around £285m.

Under the terms of the deal, Lonmin shareholders will receive 0.967 new Sibanye shares for each of their shares. The price represents a 57% premium to the closing price of Lonmin shares on Wednesday.

Following completion of the transaction, Lonmin shareholders will hold around 11.3% of the enlarged group, while Sibanye holders will own the rest.

Lonmin said the offer is in the best interests of its shareholders and provides the company with a "comprehensive and sustainable solution to the adverse challenges it faces".

"The combination of Sibanye-Stillwater and Lonmin creates a larger and more resilient company, with greater geographical and commodity diversification, that is better able to withstand short-term commodity price and foreign exchange volatility," it said.

Meanwhile, Sibanye-Stillwater said the deal is "compelling and value accretive" for its shareholders and is a logical step in executing its platinum group metals strategy.

"By combining Sibanye-Stillwater's existing, and contiguous, South African PGM assets with Lonmin's operations, including Lonmin's processing facilities, Sibanye-Stillwater will be able to unlock operational synergies and become a fully integrated PGM producer in South Africa."

Lonmin chief executive officer Ben Magara said: "Lonmin has an enviable mine-to-market business with great mining assets, projects and process technology and a resilient workforce. Despite this, Lonmin continues to be hamstrung by its capital structure and liquidity concerns. The combination with Sibanye-Stillwater provides a stronger platform for Lonmin shareholders and other stakeholders to benefit from the long-term upside potential of an enlarged Sibanye-Stillwater group with greater geographical and commodity diversification. We unanimously recommend this offer to Lonmin shareholders."

RBC Capital Markets analyst Richard Hatch upped his rating on Lonmin to 'sector perform' from 'underperform' and hiked the price target to 100p from 50p.

He said: "Given the challenging future foreseen for Lonmin, in light of its need to materially invest in longer-dated capex in order to maintain its production profile, we expect its shareholders to approve the deal. There remains potential for Sibanye to seek to reduce production from Lonmin assets, which would be positive for PGM market dynamics, but obviously would result in challenges from labour unions.

"The bid is a 57% premium to our £0.63/sh NAV for Lonmin, and represents around 4.2x EV/EBITDA multiple based on our FY18E estimates (note Lonmin ended September with net cash of $103m). Overall, this completes Sibanye’s strategy in PGMs (for now), and we expect the deal to complete."

At 0900 GMT, the shares were up 20% to 76.50p.