THE proposed merger of the platinum operations owned by Sibanye-Stillwater with Lonmin received another important approval today after the UK’s Competition and Markets Authority (CMA) unconditionally gave its support to the transaction.
All that is required now for the combination is approval by shareholders in Sibanye-Stillwater and Lonmin, as well as the South African competition authorities. Certain court approvals are also required but thought to be procedural.
“We are very pleased to have received the CMA’s clearance which takes us one step closer to completion of the offer,” said the CEOs of Lonmin and Sibanye-Stillwater – Ben Magara and Neal Froneman respectively – in a joint statement. “We remain excited about the proposed transaction which we consider to be in the best interest of our stakeholders.”
“We look forward to the combination of the businesses creating a leading mine-to-market player with enhanced scale and resources, able to compete more effectively,” they said.
Sibanye-Stillwater unveiled a scheme of arrangement offer for Lonmin on December 11 which, at the time, valued Lonmin at about £285m. Each Lonmin shareholder is to receive 0.967 in new Sibanye-Stillwater shares. Following completion of the acquisition Lonmin shareholders will hold approximately 11.3% of the enlarged Sibanye-Stillwater group and Sibanye-Stillwater will hold about 88.7% of the group.
On May 15, the South African Reserve Bank gave its approval to the transaction that Magara said was crucial should move ahead with pace. Speaking at Lonmin’s interim results presentation Magara also warned that any delays in the transaction could accelerate job losses at Lonmin given market conditions.
“About 5,300 jobs will be lost by 2019 unless conditions improve, hence the importance of doing the deal with Sibanye which would reduce job losses,” said Magara. The combination with Sibanye-Stillwater would create synergies of R1.5bn a year from about 2021.
Despite the good news on the transaction front, there was further pressure on shares in Sibanye-Stillwater which faces the risk of the Department of Mineral Resources intervening in its business. This is following a spate of fatal accidents at the Kloof and Driefontein operations. Some 21 miners have lost their lives at the company this year, mostly in the West Rand operations.
Bronstein, Gewirtz & Grossman, which is described as a corporate litigation boutique, wants to investigate whether Sibanye-Stillwater and certain of its officers and its directors “… have violated federal securities laws”. The company said its primary expertise was “… the aggressive pursuit of litigation claims on behalf of our clients.
Analysts also continued to air views on the matter.
“In a world where the entire buy-side is now being governed and directed by their ESG groups I cannot see how you can possibly own this stock in any portfolio,” said an analyst at the National Bank of Canada.
“If I was your marketing guys, I would be telling you to exit asap. You are going to have a tough time explaining to your underlying investors why/how you justify owning this stock. If this was in Canada, Australia or the US, the company would have surely have had their operations shutdown by now.”
Shares in Sibanye-Stillwater were just over a percent lower on the Johannesburg Stock Exchange today, and have halved in value in the last 12 months.
