Africa’s biggest bank said Lonmin Plc investors should reject Sibanye Gold Ltd.’s takeover offer as it undervalues the platinum miner’s assets by as much as 6.64 billion rand ($460 million).
While Sibanye’s offer equates to 11.60 rand a share, Lonmin’s value at current metal prices is 45% higher, Leroy Mnguni, an analyst at SBG Securities, a unit of Standard Bank Group Ltd., said in a note to clients. If assets such as the platinum producer’s suspended K4 project, spare processing capacity and a concentrator are factored in, Lonmin is worth about 35 rand a share, he said.
“Given the compelling indications that the pending Sibanye offer grossly undervalues Lonmin, we see increased risk that more than 25% of the shareholders will vote against the offer,” Mnguni said.
While Lonmin Chief Executive Officer Ben Magara is still recommending the deal, saying his company would otherwise lack capital to invest, Mnguni said the miner could sell some assets to extend the life of its shafts. Many of those have lower costs than operations at rival producers, he said.
TOTAL VALUATION RM | PER SHARE VALUATION R/SHARE | |
---|---|---|
Lonmin Operations | 4,771 | 16.87 |
SBG Total Valuation | 9,916 | 35.06 |
Sibanye Offer | 3,280 | 11.60 |
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