Lonmin rejects £5bn Xstrata bid

Xstrata’s £5 billion bid for platinum producer, Lonmin, has been speedily rejected.

Yesterday, the Swiss miner made an unsolicited bid approach to Lonmin, offering £33 a share, a 42% premium on the company’s closing share price of £23.19, on Tuesday.

Lonmin has stated that the offer undervalues the company, which has seen profit increase on the back of soaring platinum prices.

However, the company’s South African mines have missed their production targets, partly because of national power problems, and Xstrata believes it can turn these operations around.

Xstrata is keen to diversify its business and platinum is of particular interest because it is used to make catalytic converters for vehicles.

The group’s chief executive, Mick Davis, described the bid as the next step in a strategy to develop a significant platinum business.

Xstrata already holds an 8% stake in Lonmin and is reported to be looking to expand on this.