Miner Xstrata said on Wednesday it would not to make a formal $10-billion takeover offer for number three platinum producer Lonmin due to financing difficulties in the global credit crisis.
”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.
Loan terms required Xstrata to refinance a substantial portion of the debt within 12 months, a statement said.
”Finalising 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.
Xstrata announced a proposed offer for Lonmin, which produces platinum in South Africa, of £33 per share on August 6, but the UK takeover panel issued a ruling requiring it to make a formal bid by Thursday or walk away for six months.
Lonmin had spurned the bid as an opportunistic move that undervalued the firm and its assets.
Xstrata said the turmoil on financial markets, which has hammered its share price, did not change the fundamental outlook for the firm.
”While the current instability of the financial markets has created an environment of great uncertainty, it does not change the fundamental robust nature of Xstrata’s cash generative portfolio and profitability.”
The firm, the world’s fifth biggest diversified mining group by market value, was also still bullish about the medium term prospects for commodity prices, even though it said weakness may persist in the short term. – Reuters