Mumbai: Lonmin Plc, the world's third-biggest platinum producer, has rejected an unsolicited $10 billion takeover offer by Anglo-Swiss mining group, Xstrata, saying the 33-pound per share offer undervalued the company.
South Africa-focused Lonmin, whose shares soared 51 per cent to a high of 35 pounds on Wednesday, rejected the cash bid.
''This is an opportunistic and entirely unwelcome attempt to acquire Lonmin at a price which undervalues its unique assets,'' the under-performing platinum miner said.
The Xstrata offer is part of the miner's move to consolidate business as it diversifies industrial metals business from copper amid booming demand and soaring prices of metals.
The acquisitive Xstrata itself escaped the swoop of a wave of consolidation in the metals sector five months ago when a takeover attempt by Brazil's Vale failed.
Xstrata said it already holds an 8 per cent stake in Lonmin and plans to buy more in the open market.
Xstrata chief executive Mick Davis said his company plans to fund the $10 billion acquisition mainly through bank loans and expects to seal the financing deal with bankers soon.
Xstrata said it plans to turn around Lonmins's South African mines, which had to repeatedly cut production targets due to operational problems, smelter difficulties and power shortages.
Xstrata, which grew from a small producer of steel alloys in the late 1990s to the fifth-biggest mining group by market value through a string of acquisitions, now has interests in coal coper and nickel.
Xstrata entered platinum mining last year with a $1 billion purchase of South Africa's Eland Platinum, and later acquired Canadian nickel miner Falconbridge for $18.8 billion – its largest takeover yet – amidst soaring nickel prices.
Platinum prices, meanwhile, have fallen by a third to $1,562 an ounce from a record $2,290 in March, dragging Lonmin shares down with them.
Xstrata, however, posted a 2 per cent rise in first-half net profit at $2.83 billion.
Despite the rejection by Lonmin, Xstrata chief executive Mick Davis said he plans to pursue the deal and is open to a merger with another large miner such as Vale or Anglo American.
Xstrata, the world's largest exporter of thermal coal, has recently examined a bid for Macarthur Coal and is said to be a possible buyer of Felix Resources. It is also planning to develop the $1.1 billion Mangoola mine in the upper Hunter Valley which it bought from Centennial Coal last year. Mangoola is expected to yield up to 10.5 million tonnes of thermal coal a year.
Xstrata plc, created through an initial public offering on the London Stock Exchange in March 2002, had since acquired Glencore's Australian and South African coal assets for $2.5 billion.
In January 2003, it bought the German Nordenham zinc smelter from Metaleurop for $100 million and in June that year Xstrata completed the acquisition of Australian metals and mining group MIM Holdings – which has mining assets of coking coal, copper, zinc, lead, silver and gold - for $2.9 billion.
In April 2004, Xstrata raised its stake in Queensland-based Cook Colliery, owned by Centennial Coal Company Ltd, from 50 per cent to 95 per cent for $6.35 million.
Xstrata, which bought 19.9 per cent of Canada's Falconbridge Limited for $1.7 billion in August 2005, acquired the remaining 80 per cent for a total of about $18.8 billion.
In March 2006, Xstrata acquired over 30 per cent in the Colombian coal operation, Cerrejon, from Glencore International, for $1.7 billion and in June that year it bought Tintaya, Peru's third-biggest copper mine, from BHP Billiton for $811 million. Xstrata acquired South Africa's Eland Platinum for $1 billion in a bid to tap booming demand for the metal from Asia.