[miningmx.com] – XSTRATA said it would support Lonmin’s proposed $800m rights offer, but it called on the platinum company to overhaul its executive team ahead of adopting a fresh business plan.
In a thinly veiled threat, however, Xstrata implied that if Lonmin did not agree to a management overhaul, it would call a general meeting of shareholders.
In response, Lonmin said it would consider the views of all shareholders. “The board continues to abide by the highest standards of corporate governance and will reflect on the comments made by all shareholders during the rights issue process,” it said in a statement barely two hours after Xstrata’s.
It added that prior to Xstrata’s decision to support its refinancing plan, some 86% of the proxy voting instructions received were in favour of the resolution to approve the rights issue.
“Lonmin welcomes the support announced today from Xstrata for its forthcoming rights issue,” it added.
Mick Davis, Xstrata CEO, said his company “was open” to vote against the rights issue, but added that this would have prevented the capital raising from proceeding. Xstrata is Lonmin’s largest single shareholder with a 24.5% stake in the company.
However, Xstrata concurred that a recapitalisation of the business should take place and that it be backed up “… by a suitable management team and business plan”.
In a brutal appraisal of Lonmin’s current strategy, which was formulated by a board led by acting CEO, Simon Scott, Davis added that his company could not passively lend its support to a strategy it believed was flawed.
“We will, therefore, be seeking change to the board and management promptly following completion of the rights issue,” Davis said.
“We have asked Lonmin’s board to engage and co-operate with major shareholders to commence this process, refresh the board, strengthen the management team and overhaul the current business plan so that a realistic strategy to restore shareholder value can be developed,” Davis said.
Davis asked for an assurance that Lonmin’s executive team would be changed as that would lead to a greater take up of the rights offer. Lonmin shareholders vote on the rights issue on November 19.
The kicker to Davis’ statement reads: “This would also obviate the need for us to call a further general meeting of shareholders to make the changes we believe necessary.’
The statement was issued after the close in Johannesburg where shares in Lonmin had fallen 2.55%. In London, however, the shares were just under a percent higher.
Lonmin said last week it would issue 365.5 million new shares for £1.40p/share (R19,48/share) representing a 69.1% discount to the existing share and a 44.4% discount to the theoretical ex-rights price of an existing share. Shares issued would be equal to 64.3% of Lonmin’s currently issued share capital.
Lonmin later said in a letter to shareholders that it would be willing to engage on a possible change to its executive team once the rights issue – which has been undewritten by a syndicate of banks – had been completed.
