By Alex MacDonald
Anglo-Swiss miner Xstrata PLC (XTA.LN) announced Thursday that
it would take part in Lonmin PLC's (LMI.LN) $817 million rights
issue but put the South African platinum producer on notice that it
intends to seek changes in its board and management.
The rights issue is seen as critical to help Lonmin, the world's
third largest platinum producer, strengthen its balance sheet and
avoid a covenant breach as it seeks to restore operations to normal
output after six weeks of illegal strikes that resulted in 46
deaths and a significant loss of platinum production.
Lonmin urged shareholders Tuesday to support the fundraising so
the company wouldn't be vulnerable to a takeover approach by
Xstrata.
Xstrata, which has a nearly 25% stake in Lonmin, approached
Lonmin's board in October with an offer to let Lonmin take over
Xstrata's vanadium and platinum businesses in return for granting
Xstrata majority control of the combined business.
The deal was conditional on Lonmin conducting a $1 billion
rights issue. Lonmin's board rebuffed that offer and a second
Xstrata offer last week in which the Swiss-based miner said it
would participate in the rights issue only if Lonmin promised to
change its executive directors.
In a letter to Lonmin's chairman Roger Phillimore, Xstrata CEO
Mick Davis said, "We do not wish to contribute further uncertainty
to Lonmin's position that may further impede operational
performance and delaying the proposed rights issue could run the
risk that market conditions or other factors prevent a successful
rights issue in the future."
He said, however, that Xstrata will "be seeking change to the
board and management promptly following completion of the rights
issue" with a view to overhauling Lonmin's current business plan
and creating a "realistic strategy to restore shareholder
value."
Lonmin's shareholders are due to vote Nov. 19 on the rights
issue, which needs approval from 50% of voting shareholders. It
appears the company doesn't have far to go.
In a statement Thursday, Lonmin said 86% of the proxy votes
received to date from shareholders were in favor of the rights
issues. Shareholders representing 47% of the company's outstanding
shares have submitted their proxy votes, a Lonmin spokesman said
later. Taken together, the two figures mean just over 40% of
shareholders favor the rights issue.
Lonmin welcomed Xstrata's support and said it would consider all
shareholder comments during the rights issue process.
Mr. Davis said Xstrata would seek another Lonmin shareholder
meeting in the absence of assurances from Lonmin's board to make
changes at company. Shareholders who have a 10% stake or more in
Lonmin have the power to convene a general meeting, an Xstrata
spokesman said.
Lonmin's shares closed Thursday up 0.7% or 3.4 pence at 490.4
pence a share.
--Tapan Panchal contributed to this story
Write to Alex MacDonald at alex.macdonald@dowjones.com
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