Lonmin takeover to be reviewed by the CMA over competition fears
The Competition and Markets Authority (CMA) said it will review the takeover by South African company Sibanye-Stillwater of platinum miner Lonmin to determine whether it would harm market competition.
Lonmin agreed on a £285m takeover which would make it the second largest platinum producer in the world, second only to Anglo American Platinum, which could be a cause for concern for the British market competition watchdog.
The deal, which is set to close later this year, has not yet been approved by either company's shareholders and depends on approval from both the CMA and the South African market competition authority.
Read more: Platinum miner Lonmin cuts spending close to Sibanye-Stillwater takeover
Lonmin, which has suffered a substantial financial decline recently, decided on Monday to cut annual spending which led to 1,500 redundancies within the company and could potentially put another 12,600 jobs at risk over the next three years.
Sibanye-Stillwater said that if Lonmin did not stabilise its finances by the time the deal is set to close, it would not go ahead with it. On Tuesday, Lonmin's share price fell by four per cent and Sibanye-Stillwater's by more than five per cent.
Sibanye-Stillwater made an all-share offer in December of last year offering 0.967 new shares in the company for every Lonmin share.
Analyst at Shore Capital Yuen Low told City A.M. that he thought the merger would decrease competition significantly as both Lonmin and Sibanye-Stillwater are each responsible for a large bulk of the world's platinum production.
He did however also say: “I am leaning towards approvals from the South African and UK competition authorities, because Lonmin going bust would be even worse for competition. This is not to say that the CMA approval process will necessarily prove straightforward.”
“The CMA might decide to investigate in more depth and/or kick an unfavourable finding 'upstairs' to the relevant Secretary of State for a final decision. For its part, Lonmin will clearly be hoping for 'straightforward' transaction clearance on 10 July,” he continued.
Read more: Lonmin shares jump 20 per cent as it agrees to £285m takeover
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