Tribunal imposes jobs condition as part of Lonmin, Sibanye-Stillwater merger support

THE merger of Lonmin with Sibanye-Stillwater was approved by South Africa’s Competition Tribunal today on condition the parties observed a six month moratorium on retrenchments. The decision was welcomed by Neal Froneman, CEO of Sibanye-Stillwater.

“I am extremely pleased that the Competition Tribunal has approved the transaction, on terms which we believe are fair, reasonable and in the best interest of all stakeholders,” he said in a statement to the Johannesburg Stock Exchange News Service. The tribunal and its commission had been “comprehensive and pragmatic”, he added.

Court approvals are required for the merger to go through, but first shareholder votes are required at both Lonmin and Sibanye-Stillwater. This would take place some 30 days after posting of the merger circulars. “That will put us in January,” said James Wellsted, head of investor relations at the company.

Wellsted added that the retrenchment moratorium imposed on the merger would not imply any additional costs although it could delay some minor aspects of the merger. “We were always going to make a proper assessment of the combined operations and that would have required us to issue at Section 189 notice (in terms of the Labour Relations Act).

“That is a six month process,” he said. The moratorium imposed by the Competition Tribunal excluded any voluntary separation agreements.

Lonmin had previously proposed cutting 12,500 job cuts at mines that are due to run out of commercial deposits in the next three years. It had already cut about 2,000 jobs.

The merger was opposed by the Association of Mineworkers & Construction Union (AMCU) which is the main union at Lonmin.

It argued that economic conditions had improved such the jobs could be preserved – a view countered by Lonmin’s CFO, Barrie van der Merwe who told the Competition Tribunal last week that the firm would need $450m to $500m in order to continue operating with its current staffing – funds that could not be raised in the market.

Said Ben Magara, CEO of Lonmin in a statement: “Despite our enviable mine to market operations and our positive fourth quarter performance, the fundamental challenges the company faces as a standalone business remain. Consolidation provides a sustainable solution to the industry’s challenges”.

The Competition Commission had in September recommended that Sibanye-Stillwater continue with Lonmin’s social and labour plan, retain its policy on procurement, and – perhaps most importantly – “… mitigate the potential impact of retrenchments” insofar as operations are supported by metal pricing and synergies the merger will extract”.

All eyes now on the shareholder votes in 2019.

South Africa’s Public Investment Corporation (PIC), which owns 11.2% of Sibanye-Stillwater and 29.2% of Lonmin said in a statement on September 4 that it had “… expressed support for the deal right from the outset. We believe that it will assist in driving consolidation in an ailing sector”.

In June, Britain’s Competition and Markets Authority (CMA) unconditionally cleared the transaction, saying it would not require a second phase investigation.

5 COMMENTS

  1. Dear Fellow Readers,

    There is an egregious corporate governance matter that has arisen regarding the Lonmin/Sibanye deal that i will explore in details next year by putting numbers to it. I wish to state upfront that as RSA mining, we should welcome Chinese investment or any other investment. Investment being the operative word. This relates to the Chinese investors of SGL , and their related parties. BCX/Baiyin holds ±20% of SGL shares. Furthermore, they are a self-confessed cornerstone investor for SGL. They did all this without ponying-up a cent!

    Readers might recall that other commentators expressed reservations as to the reasons why Lonmin was concluding a $200M streaming deal , with SGL as co-guarantor. Such a Streaming deal was a 3-yr tenure at a cost of >15%/yr, thus very expensive. The logical thing would have been for SGL to extent its available RCF to Lonmin , so that it provide such stop-gap funding & liquidity.

    The commentators were all correct, actually the financing provider to Lonmin is Pangea Investment Management Limited , which is a subsidiary of Jiangxi Copper Company Limited (JCC). Controlling shareholders ( ±67%) in JCC is Gansu Province, China Investment Corp (CIC) & CITIC. These 3x entities are controlling shareholders , at ±85%, in Baiyin non-ferrous Group ( Baiyin). So the refinancing of Lonmin is solely aimed at benefiting a major SGL shareholder. It is backroom deal done to divert/bleed-off a cashflow stream away from other shareholders. This is horrendous corporate governance.

    But there is a history and pattern here by Froneman et al. Readers will recall that the Cooke Operations were bought , for >R5Bn , by Sibanye in 2012 solely to benefit Baiyin by bailing them out of these loss-laden no-hope operations. They scored big because to date, SGL has struggled to get buyers for these assets which are on care & maintenance because frankly nobody can do anything with them anymore. The asset-for-shares deal has made Baiyin some >R12Bn better off to date. Furthermore, the other profitable asset (Modder East) is for their sole benefit. The Cooke deal was dumb deal … purposefully so to benefit Baiyin.

    So Froneman, is up to it again with the Lonmin refinancing. Readers, of all the investing risks that needs to be borne, axiomatic corporate governance failures are just NOT worth it. You will always lose as a minority shareholder ….ALWAYS!

    THIS IS SO PERNICIOUS THAT IT WARRANTS DUMPING SGL SHARES!

    So given the capital gains profits , from R7/sh to R9.7/sh ……fellow readers might reconsider their positions in this stock before the aforesaid cash flow drain to China commences!

  2. “South Africa’s Public Investment Corporation (PIC), which owns 11.2% of Sibanye-Stillwater and 29.2% of Lonmin said in a statement on September 4 that it had “… expressed support for the deal right from the outset. We believe that it will assist in driving consolidation in an ailing sector”.

    Well. There’s a surprise!

    • Dear Anon,
      I don’t believe its a surprise ….Its incompetence in the extreme!

      Such abuse can never be tolerated by well-versed Institutional shareholders. Its abhorrent!

      • So….. I guess you’ll be writing ANOTHER letter/comment, BS? Yes, yes, I’ m sure that will help your noble cause – the MINORITIES!!😂😂😂

  3. Anonymous,

    You are correct…there will be a follow-up comment! I motivate my viewpoints unlike you!

    You are dead certain that i seek to champion minority shareholders rights because i am always one of them. That includes uncovering some facts , as per my comment, which are hidden from the public who take things ex facie.

Comments are closed.