Sibanye buying long-suffering Lonmin in R5.17bn deal

Sibanye offered £285m (R5.17bn) to buy Lonmin in an all-share offer, according to a statement on Thursday. The deal, Sibanye’s fourth major acquisition in the past two years, cements the status of Chief Executive Officer Neal Froneman as a top dealmaker in platinum and gold.

“The operating synergies between the two groups do incentivise a merger and could finally allow Lonmin to restructure and optimise its business,” wrote analysts at Berenberg in a research report. “We view this as a positive for Lonmin and a negative for Sibanye on a valuation basis.”

The deal highlights the ascendance of Sibanye, born about five year ago in a spinoff from Gold Fields [JSE:GFI], and the death of Lonmin, a company with a 108-year history stretching from Cecil Rhodes’s legacy in southern Africa to a conglomerate in the 1980s spanning mining, hotels and newspapers.

After Marikana

CEO Ben Magara has pushed to get Lonmin back on track and repair its reputation after the shootings at Marikana in 2012, when police killed protesting mineworkers. But it hasn’t been enough. The company has raised about $1.7bn from shareholders in the past eight years, yet its current market value is about $215m.

Lonmin shareholders will get 0.967 new shares in Sibanye, which will be about 11.3% of the total company after the acquisition is complete. The acquisition has been approved by both boards.

Sibanye declined 1% to R15.95 at 11:13 in Johannesburg. Lonmin jumped 12% to R13.94.

Sibanye was supposed to be a steady, dividend-paying operator of three aging but profitable South African gold mines. Instead, Froneman has led the company to acquisitions outside of gold, including the $2.2bn takeover of Stillwater Mining this year.

In 2015, Sibanye agreed to buy Aquarius Platinum and made a deal for some aging, high-cost platinum mines from Anglo American Platinum. A year later, the Stillwater acquisition was announced.

The deals have come with a price. The Stillwater purchase left Sibanye with net borrowings more than double its annual earnings and the company canceled its dividend.