Xstrata ditches Lonmin bid due to credit crunch
Miner Xstrata Plc dropped plans for a $10 billion takeover bid for No. 3 platinum producer Lonmin Plc on Wednesday due to financing difficulties linked to the global credit crunch, sending Lonmin’s share price plummeting.
“The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata,” Chief Executive Mick Davis said in a statement.
Lonmin’s shares, which had already shed a third since Xstrata made its 33-pound-per-share proposed offer on August 6, tumbled as much as 30 percent and was trading 18.7 percent weaker at 18.00 pounds by 0733 GMT.
Xstrata shares, which had shed 46 percent since it made the approach, surged 10.7 percent to 19.00 pounds, compared to a 4.9 percent increase in the UK mining index.
“This is certainly the outcome that the majority of (Xstrata) shareholders will have wanted in the short term cashadvance. Xstrata had become a natural target for short sellers in the market,” Cazenove said in a note.
Xstrata said loan terms required it to refinance a substantial portion of the debt within 12 months.
“Finalizing the bank debt necessary to implement the offer on those terms would not be in the best interest of Xstrata. As a result, Xstrata has no current intention to make an offer for Lonmin.”
Banking sources told Reuters last month that Xstrata had approached 22 banks to make commitments for a $15 billion loan to both fund the Lonmin takeover and refinance existing debt.