Sibanye needs the backing of 75 per cent of Lonmin shareholders and the takeover is touted as a lifeline as Lonmin loose cash, but some investors are concerned by the drop in Sibanye’s stock since the all-share deal was announced in December 2017.
Sunday 26, May 2019
(Bloomberg) -- SBG Securities, a unit of Standard Bank Group said that Lonmin investors should reject Sibanye Gold’s takeover offer as it undervalues the platinum miner’s assets by as much as ZAR 6.64 billion ($460 million).
Leroy Mnguni, an Analyst at SBG Securities, said that while Sibanye’s offer equates to ZAR 11.60 a share, Lonmin’s value at current metal prices is 45 per cent higher and if assets such as the platinum producer’s suspended K4 project, spare processing capacity and a concentrator are factored in, Lonmin is worth about ZAR 35 a share.
“Given the compelling indications that the pending Sibanye offer grossly undervalues Lonmin, we see an increased risk that more than 25 per cent of the shareholders will vote against the offer,” Mnguni said.
While Lonmin Chief Executive Officer Ben Magara is still recommending the deal, saying his company would otherwise lack the capital to invest, Mnguni said the miner could sell some assets to extend the life of its shafts.
Many of those have lower costs than operations at rival producers, added Mnguni.
Last month, Sibanye increased the share ratio it’s offering to Lonmin investors after metal prices rose, the value of the deal remains lower than when it was first announced.