Amcu loses appeal against Sibanye’s bid for Lonmin
The path is now cleared for shareholders in both companies to vote on the all-share deal as some analysts push for a higher offer for Lonmin
The Competition Appeal Court ruled against the Association of Mineworkers and Construction Union (Amcu) in its appeal against a tribunal decision to conditionally approve Sibanye-Stillwater’s takeover of Lonmin.
Sibanye’s all-share bid for Lonmin has now cleared all the hurdles ahead of shareholder votes at both companies to approve the transaction, which will thrust Sibanye into one of the leading positions as a global platinum group metals (PGMs) producer.
On Friday morning, the court dismissed the Amcu appeal with costs, Sibanye and Lonmin said.
However, the vote for the transaction from Lonmin shareholders is not as clear cut as it might have been when Sibanye and the world’s third-largest platinum mine unveiled the bid at the end of 2017.
With improved PGM prices and a return to profit at Lonmin, analysts such as Vunani’s Hurbey Geldenhuys argue that Sibanye should pay more for the platinum company, offering three shares for every one in Lonmin against the one-for-one that is on the table.
There are a growing number of investors questioning the roughly R4bn price Sibanye is paying for a remarkable suite of assets that include base and precious metals refineries, concentrators and shafts. The replacement cost of this infrastructure runs into many multiples of what Sibanye is paying.
However, other analysts point out that Lonmin’s poor track record and repeated calls on shareholders to prop it up mean that it is unlikely to attract a fresh capital injection from banks or shareholders any time soon, leaving it unable to invest in its business and at risk to any downturn in the PGMs market.
Lonmin CEO Ben Magara again endorsed the Sibanye bid in the company’s latest market update last Friday, pointing out that Lonmin did not have the capital to complete critical projects and that Sibanye is the best option to ensure the long-term future for its mines.
“We welcome this decision as it clears the way towards the shareholder votes on May 28. The combination creates a larger and more diversified company that we believe is in the best interest of Lonmin shareholders and other stakeholders,” Magara said on Friday.
Sibanye CEO Neal Froneman said, “We believe the transaction continues to be in the best interest of all stakeholders.” Sibanye’s shareholders also vote on May 28.
Difficult wage talks
Amcu has just finished a five-month wage strike at Sibanye’s gold mines and the expectation is for difficult wage talks at the company’s platinum division with the union in coming months.
Amcu president Joseph Mathunjwa has vociferously opposed the takeover, citing deep concerns around job losses in the merged entity. The tribunal imposed a moratorium on any job cuts in the merged entity, which would be one of the world’s leading sources of PGMs, with Sibanye owning mines, concentrators, smelters and refineries in SA, Zimbabwe and the US.
Lonmin and Sibanye have extended the stop date for the conclusion of the transaction to end-June from end-February to accommodate the appeal process.
The tribunal noted there has been confusion and heated arguments about the scale of job cuts, with arguments raging about which are merger related. Amcu argued that all job losses stemmed from the deal, while Sibanye stated that of the 13,334 positions to be cut, only 885 were directly related to the takeover.
Lonmin had said in October 2017 that it was going to cut 10,156 jobs and the Competition Commission took the view in its recommendation to the tribunal that the deal be approved and that any cuts on top of that should be merger-related.
Sibanye told the tribunal it would place a six-month moratorium on retrenching 1,831 people and would run studies into agricultural programmes, investing in certain Lonmin shafts, and setting up a consultative forum to implement Lonmin’s social and labour plans.
Drawing a firm line under the varied number of jobs that could be lost because of the merger, the tribunal imposed a moratorium on all job cuts for six months pending the outcome of a detailed study.