| Wed 6 Aug 2008, 8:04 | | GEN - Xstrata Plc - Proposed cash offer for Lonmin Plc of GBP33.00 per share |
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GEN - Xstrata Plc - Proposed cash offer for Lonmin Plc of GBP33.00 per share
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN PART) IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION
XSTRATA PLC
NEWS RELEASE
PROPOSED CASH OFFER FOR LONMIN PLC ("LONMIN")OF GBP33.00 PER SHARE
Zug, 6 August 2008
Highlights
- Proposed offer represents a cash premium of 42 per cent to Lonmin`s share
price of GBP23.19 at the close of business on Tuesday 5 August
- Opportunity for Lonmin shareholders to realise significant cash premium at a
time of ongoing operational challenges
- Proposed offer price fully and fairly values Lonmin`s asset base and growth
pipeline, while recognising the inherent risks, time and investment required
to restore production to previous levels
- South African based platinum mining, smelting and refining expertise,
successful track record and unique synergies position Xstrata to turn around
Lonmin`s operations
- Transaction accelerates Xstrata`s platinum growth strategy and would
establish Xstrata as the third largest producer of platinum with further
earnings diversification
- Xstrata has acquired 8.03% of Lonmin`s issued share capital
- No expected regulatory or competition impediments to the proposed offer
Xstrata plc ("Xstrata" or the "Group") announces a proposed cash offer for
Lonmin of GBP33.00 for each Lonmin share, valuing Lonmin`s issued share capital
at approximately GBP5 billion ($10 billion). The proposed offer price
represents a premium of 42 per cent. to Lonmin`s share price of GBP23.19 as at
the close of business on 5 August 2008. Xstrata has acquired 12,557,467 Lonmin
shares, representing 8.03 per cent. of Lonmin`s issued share capital.
Xstrata`s proposed offer for Lonmin, the world`s third largest platinum
producer, reflects the Group`s long-stated intention to develop a significant
platinum business. Over the last two years, Xstrata Alloys has successfully
established a platform in the platinum market through the Mototolo joint venture
with Anglo Platinum, the acquisition of Eland in 2007 and the subsequent rapid
development of the Elandsfontein mine and concentrator. In a further step,
Xstrata and Nkwe/Genorah today announced a new development joint venture which
provides Xstrata with a 50% option over five highly prospective properties in
the Eastern Limb of the Bushveld complex in South Africa.
Lonmin`s operations and growth projects are located in the Bushveld complex in
South Africa, a country which accounts for approximately 77% of global platinum
supply. Lonmin`s operations are fully integrated from mine to market and
benefit from a substantial resource base with a published life of mine in excess
of 30 years and further growth potential. Lonmin`s principal asset, the Marikana
complex, is located some 10 kilometres from Xstrata Alloys` Wonderkop complex
and within 40 kilometres of Xstrata Alloys` head office.
The performance of the Lonmin business has been impacted by numerous operational
difficulties over the past two years, including:
- underperformance of mining operations due to the challenges presented by a
rapid mechanisation strategy. This has resulted in inadequate reserve
development and below budget production at a time of robust platinum prices;
- erratic processing performance due to inconsistencies in ore feed and smelter
failures;
- a complex and enlarged management structure, dissociated from the operational
teams in South Africa; and
- a significant loss of experienced operating personnel.
Lonmin`s operations have consistently underperformed its own forecasts on
expected platinum sales and have been subject to a declining sales and
production profile at a time of robust prices. Current guidance of 765,000 to
770,000 ounces of platinum for the year to 30 September 2008 is 15% lower than
the initial guidance provided for this period of 900,000 ounces and represents
the fourth downward revision in this financial year. This indicates an
anticipated 18% decline in sales of platinum from the levels achieved two years
ago of 939,654 ounces in the twelve months to 30 September 2006, reflecting
ongoing unexpected operational difficulties and lower than anticipated
production.
These issues have not been resolved. Xstrata believes that Lonmin`s operations
are attractive, but that a significant transformation of operating and
management practices is required to return Lonmin to its former growth
trajectory over time.
Xstrata believes it is uniquely positioned to realise the full potential of
Lonmin`s long life and high quality but underperforming asset portfolio.
Xstrata`s ferro-alloys business unit, Xstrata Alloys, has an excellent
operational track record in building and operating similar operations in close
proximity to Lonmin`s core operations and has developed significant and relevant
technical mining and smelting skills through its South African chrome business.
Xstrata Alloys` chrome operations mine the same Bushveld geological complex as
the South African platinum industry with an industry-leading cost profile and
use similar smelting technology. Through the development of Xstrata`s growing
platinum business, this expertise has been supplemented with specific
operational PGM management and skills.
Further relevant expertise is available to Xstrata through its proprietary
technology business, Xstrata Technology Services, with direct experience in
resolving operational issues at platinum and base metals concentrator, smelting
and refining operations, including the supply of proprietary IsaMill fine
grinding technology to the platinum industry. Xstrata Nickel has also developed
extensive PGM processing expertise at its Nikkelverk refinery in Norway and
currently refines over 500,000 ounces of PGMs per annum.
Xstrata`s significant technical expertise and the proximity of Xstrata`s
existing PGM and chrome assets with Lonmin`s core operations substantially
reduce the risks inherent in any acquisition of this complexity.
Furthermore, a combination with Lonmin would enhance power optionality across
Xstrata`s portfolio of South African assets and increase the availability of
chrome-rich UG2 tailings (the waste product of platinum mining), providing an
additional low-cost source of feed for Xstrata`s chrome smelters.
Mick Davis, Xstrata plc Chief Executive, commented:
"Today`s announcement marks the next step in our strategy to develop a
significant platinum business and add further scale and diversification to our
portfolio. An unrivalled combination of operational synergies, relevant
experience and skills and a track record of turning around underperforming
operations to create value, position Xstrata as the natural owner of the Lonmin
assets.
"Xstrata`s proposed offer will provide Lonmin shareholders with an opportunity
to realise a cash premium for their investment, which fairly values Lonmin`s
operations and growth potential, while acknowledging the risks, time and
investment involved in a turnaround of this scale and nature.
"Our proven devolved management structure, which empowers operational management
and removes the burden of overhead, together with our detailed understanding of
the significant operational and management changes that are required, give me
great confidence that Xstrata is ideally placed to unlock the unrealised
potential of Lonmin`s extensive resource base and growth potential.
"Xstrata has an established history of successfully operating in South Africa
and we currently employ over 25,000 South Africans at our coal, ferroalloys and
platinum operations. Since our initial public offering in 2002, Xstrata has
invested over ZAR33 billion ($4.2 billion) in the country through the
development of new and existing operations, significant community investment and
fiscal contributions. We look forward to investing in Lonmin`s underperforming
operations to realise growth, create value and secure the long-term viability of
these assets, in partnership with Lonmin employees, Lonmin`s well-established
partner Incwala, provincial and national authorities and local communities."
Xstrata expects to fund its proposed offer for Lonmin through cash at hand and
bank debt. The announcement of a firm intention to make an offer is subject
only to the finalisation of the bank debt necessary to implement the offer.
Xstrata reserves the right to waive this pre-condition. Xstrata does not expect
any impediments to securing the necessary financing or any material regulatory
impediments to the proposed offer. Relevant documentation is expected to be
filed with anti-trust and other regulatory bodies as soon as possible. Any
offer will be subject to standard terms and conditions and obtaining the
relevant regulatory clearances, including in the Republic of South Africa (which
may be structured as a pre-condition to making the offer). Xstrata does not
expect the proposed offer to be subject to Xstrata shareholder approval. The
proposed offer would be made by Xstrata or a whollyowned subsidiary of Xstrata.
This announcement does not amount to a firm intention to make an offer. Any
proposal is at an early stage and there can be no certainty that any offer will
ultimately be made, even if the above pre-condition is waived. Deutsche Bank is
acting as joint financial adviser and broker to Xstrata and Macquarie is acting
as joint financial adviser to Xstrata.
If, and to the extent that, a dividend or dividends are paid or become payable
to shareholders of Lonmin (1) in respect of the financial year ending 30
September 2008 in excess of US$0.59 per share to be paid on 8 August 2008 and
US$0.66 per share as a final (or second interim) dividend or (2) in respect of
the financial year ending 30 September 2009 in excess of US$0.66 per share, then
Xstrata shall have the right, as an alternative to lapsing any offer for the non
fulfilment of its conditions, to reduce the consideration for each Lonmin share
by an amount equal to the excess.
Xstrata will hold an analyst and investment market presentation in respect of
Xstrata plc half-yearly results to 30 June 2008 and the proposed offer for
Lonmin at 9.30am British Summer Time today (Wednesday, 6 August) at the Business
and Media Centre, London Stock Exchange, 10 Paternoster Square, London, EC4M
7LS. The presentation slides and a live and recorded webcast will be available
from
www.xstrata.com.
Telephone dial in details (listen only) for the presentation are as follows:
Toll Free UK and Switzerland: 00800 2467 8700Toll Free Australia: 1 800 005
903Toll Free USA: 1 866 291 4166ROW: +44 20 7107 0611 or +41 91 610 5600
A further investment market conference call will be held at 16.30 British Summer
Time (11.30 EST); dial in details are as follows:
Toll Free UK: 0808 109 0700Toll Free USA: 1 866 966 5336Toll Free South Africa:
0800 980 524
Ends
Xstrata contacts
Xstrata Investors and analystsHanre
Claire Divver Telephone:+44 20 7968 RossouwTelephone:+44 20 7968
2871Mobile:+44 7785 964 340Email: 2820Mobile:+44 7879 455
cdivver@Xstrata.com 885Email: hrossouw@Xstrata.com
Deutsche Bank
Brett Olsher
Nigel Robinson
Charlie Foreman (Corporate Broking)
Telephone:+44 20 7545 8000
Notes to editors
About Xstrata
Xstrata is a global diversified mining group, listed on the London and SWX Swiss
Stock Exchanges, with its headquarters in Zug, Switzerland. Xstrata`s businesses
maintain a meaningful position in seven major international commodity markets:
copper, coking coal, thermal coal, ferrochrome, nickel, vanadium and zinc, with
a growing platinum group metals business, additional exposures to gold, cobalt,
lead and silver, recycling facilities and a suite of global technology products,
many of which are industry leaders. The Group`s operations and projects span 18
countries: Argentina, Australia, Brazil, Canada, Chile, Colombia, the Dominican
Republic, Germany, New Caledonia, Norway, Papua New Guinea, Peru, the
Philippines, South Africa, Spain, Tanzania, the USA and the UK. Xstrata employs
approximately 56,000 people, including contractors.
In 2007, Xstrata invested over US$102 million in total in initiatives to support
the communities associated with our operations globally. In the same year, over
ZAR162 million (US$23 million) was invested in South Africa to support
communities in the areas of health, education, community development, enterprise
development and art/culture.
Lonmin owns approximately 21 per cent. of the issued share capital of Platmin
Limited, a Canadian company with listings on both the Toronto Stock Exchange and
on the AIM Market operated by London Stock Exchange plc. Platmin Limited`s
principal activity is to explore, and work towards the development of, PGM
deposits in South Africa. Xstrata does not intend to make an offer to acquire
shares in Platmin Limited, and is not required to do so under the applicable
Canadian provincial take-over rules.
Deutsche Bank AG is authorised under German Banking Law (competent authority:
BaFin - Federal Financial Supervising Authority) and with respect to UK
commodity derivatives business by the Financial Services Authority; and is
regulated by the Financial Services Authority for the conduct of UK business.
Deutsche Bank AG is acting exclusively for Xstrata and no-one else in connection
with the proposed offer and will not be responsible to anyone other than Xstrata
for providing the protections afforded to clients of Deutsche Bank AG nor for
providing advice in relation to the proposed offer or any matter referred to in
this announcement.
Macquarie Capital (Europe) Limited, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting exclusively for
Xstrata and no-one else in connection with the proposed offer and will not be
responsible to any person other than Xstrata for providing the protections
afforded to clients of Macquarie Capital (Europe) Limited nor for providing
advice in relation to the proposed offer or any matter referred to in this
announcement.
Notice to US holders of Lonmin shares
Any offer will be made for the securities of a UK company and will be subject to
UK disclosure requirements, which are different from those of the United States.
The financial information included in this announcement has been prepared in
accordance with International Financial Reporting Standards and thus may not be
comparable to financial information of US companies or companies whose financial
statements are prepared in accordance with generally accepted accounting
principles in the United States. Any offer will be made in the United States
pursuant to applicable US tender offer rules and otherwise in accordance with
the requirements of the City Code. Accordingly, any offer will be subject to
disclosure and other procedural requirements, including with respect to
withdrawal rights, offer timetable, settlement procedures and timing of payments
that are different from those applicable under US domestic tender offer
procedures and law.
It may be difficult for US holders of Lonmin shares to enforce their rights and
any claim arising out of the US federal securities laws, since Xstrata and
Lonmin are located in a non-US jurisdiction, and some or all of their officers
and directors may be residents of a non-US jurisdiction. US holders of Neor
shares may not be able to sue a non-US company or its officers or directors in a
non-US court for violations of the US securities laws. Further, it may be
difficult to compel a non-US company and its affiliates to subject themselves to
a US court`s judgement.
In accordance with normal UK practice and pursuant to exemptive relief from the
US Securities and Exchange Commission, Xstrata or its nominees, or its brokers
(acting as agents), may from time to time make certain purchases of, or
arrangements to purchase, Lonmin shares outside the United States, other than
pursuant to any offer, before or during the period in which any offer remains
open for acceptance. Also, in accordance with Rule 14e-5(b) of the US Exchange
Act, Deutsche Bank will continue to act as an exempt market maker in Lonmin
shares on the London Stock Exchange. These purchases may occur either in the
open market at prevailing prices or in private transactions at negotiated
prices. Any information about such purchases will be disclosed as required in
the UK, will be reported to a Regulatory Information Service of the UK Listing
Authority and will be available on the London Stock Exchange website,
www.londonstockexchange.com.
Forwardlooking statements
This announcement contains statements which are, or may be deemed to be,
"forwardlooking statements" which are prospective in nature. Forwardlooking
statements are not based on historical facts, but rather on current expectations
and projections about future events, and are therefore subject to risks and
uncertainties which could cause actual results to differ materially from the
future results expressed or implied by the forward-looking statements. Often,
but not always, forward-looking statements can be identified by the use of
forward-looking words such as "plans", "expects" or "does not expect", "is
expected", "is subject to", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or variations
of such words and phrases or statements that certain actions, events or results
"may", "could", "should", "would", "might" or "will" be taken, occur or be
achieved. Such statements are qualified in their entirety by the inherent risks
and uncertainties surrounding future expectations.
Such forwardlooking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of Xstrata to be materially different from any future results,
performance or achievements expressed or implied by the forward looking
statements. Important factors that could cause actual results, performance or
achievements of Xstrata to differ materially from the expectations of Xstrata
include, among other things, general business and economic conditions globally,
commodity price volatility, industry trends, competition, changes in government
and other regulation, including in relation to the environment, health and
safety and taxation, labour relations and work stoppages, changes in political
and economic stability, disruptions in business operations due to reorganisation
activities (whether or not Lonmin is acquired), interest rate and currency
fluctuations, the failure to satisfy any conditions for any possible offer on a
timely basis or at all, the failure to obtain financing for an offer for Lonmin
on commercially acceptable terms or at all, the failure to satisfy the
conditions of any actual offer for Lonmin if and when made (including approvals
or clearances from regulatory and other agencies and bodies) on a timely basis
or at all, the failure to acquire all of the issued share capital of Lonmin on a
timely basis or at all, the inability to successfully integrate Lonmin`s
operations and programmes with those of Xstrata if and when Lonmin is acquired,
incurring and/or experiencing unanticipated costs and/or delays or difficulties
relating to integration of Lonmin if and when Lonmin is acquired. Such forward-
looking statements should therefore be construed in light of such factors.
Neither Xstrata, nor any of its associates or directors, officers or advisers,
provides any representation, assurance or guarantee that the occurrence of the
events expressed or implied in any forward-looking statements in this
announcement will actually occur. You are cautioned not to place undue reliance
on these forward-looking statements.
Other than in accordance with its legal or regulatory obligations (including
under the UK Listing Rules and the Disclosure and Transparency Rules of the
Financial Services Authority), Xstrata is not under any obligation and Xstrata
expressly disclaims any intention or obligation to update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.
Not a profit forecast
No statement in this announcement is intended as a profit forecast and no
statement in this announcement should be interpreted to mean that earnings per
Xstrata or Lonmin ordinary share for the current or future financial years would
necessarily match or exceed the historical published earnings per Xstrata or
Lonmin ordinary share.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the
"Code"), if any person is, or becomes, "interested" (directly or indirectly) in
1% or more of any class of "relevant securities" of Lonmin, all "dealings" in
any "relevant securities" of that company (including by means of an option in
respect of, or a derivative referenced to, any such "relevant securities") must
be publicly disclosed by no later than 3.30pm (London time) on the London
business day following the date of the relevant transaction. This requirement
will continue until the date on which the offer becomes, or is declared,
unconditional as to acceptances, lapses or is otherwise withdrawn or on which
the "offer period" otherwise ends. If two or more persons act together pursuant
to an agreement or understanding, whether formal or informal, to acquire an
"interest" in "relevant securities" of Lonmin, they will be deemed to be a
single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant
securities" of Lonmin by (Xstrata) or by any of their respective "associates",
must be disclosed by no later than 12.00 noon (London time) on the London
business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose "relevant
securities" "dealings" should be disclosed, and the number of such securities in
issue, can be found on the Takeover Panel`s website at
www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
securities. In particular, a person will be treated as having an "interest" by
virtue of the ownership or control of securities, or by virtue of any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the
Panel`s website. If you are in any doubt as to whether or not you are required
to disclose a "dealing" under Rule 8, you should consult the Panel.
Date: 06/08/2008 08:04:35 Produced by the JSE SENS Department.
