Diversified miner Xstrata has confirmed today (1st October) that it has pulled out of a proposed $10 billion takeover of Lonmin, the world's third-largest platinum producer.

The firm launched the provisional £33-per-share offer on 6th August but was subsequently given a "put up or shut up" ultimatum under British trading law to formalise the bid.

That deadline was due to expire tomorrow, but now Chief Executive Mick Davis has confirmed that the deal is off, partly as a result of the delicate nature of the current global credit situation.

He said in a statement: "The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata."

Loan terms requiring Xstrata to refinance a large portion of the debt within 12 months played a role in its decision, while the company has also been a victim of short-selling in recent weeks.

A company statement explained: "Finalising the bank debt necessary to implement the offer on those terms would not be in the best interest of Xstrata. As a result, Xstrata has no current intention to make an offer for Lonmin."

UK laws also state Xstrata cannot launch another hostile takeover for six months unless both parties agree a deal, but Liberum Capital analyst Michael Rawlinson has speculated that Lonmin shareholders may still be tempted to accept a lower deal.

Many observers believe the move would be positive for Lonmin, whose production targets have regularly been slashed as a result of power shortages, operational issues and smelter difficulties.


Source:
Xstrata ditches Lonmin bid due to credit crunch (01/10/08)
http://africa.reuters.com/business/news/usnJOE49001F.html