Sibanye's Lonmin takeover faces British antitrust scrutiny

FILE PHOTO: A mine worker returns from the Lonmin mine at the end of his shift, outside Rustenburg October 5, 2015. REUTERS/Siphiwe Sibeko/File Photo

LONDON (Reuters) - Britain’s Competition and Markets Authority said it will examine whether a takeover of Lonmin by South Africa’s Sibanye-Stillwater would reduce competition, knocking shares in both mining firms.

Precious metals miner Sibanye-Stillwater made an all-share offer for London-listed Lonmin in December, but the planned 285 million pound ($386 million) deal to create the world’s No.2 platinum producer faces several other hurdles.

These include Lonmin’s shrinking cash balance, a stronger rand and competition approval in South Africa.

Shares in cash-strapped Lonmin, the world’s third-largest platinum producer, had slipped 4 percent in London by 1554 GMT, while Sibanye, the fourth-largest, saw its stock close down 5.3 percent in Johannesburg.

“The longer the delay, the greater the potential for transaction failure, since the likelier it would be that Lonmin would be in net debt,” Shore Capital analyst Yuen Low said.

“Even supposing the CMA approved the transaction, there could be delays to the transaction,” Low said of the deal which is scheduled to close in the second half of the year.

If the deal is blocked it would trigger Lonmin’s debt covenants and require the platinum miner to pay $150 million in 20 days after credit waivers were granted by Lonmin’s lenders in January, preventing it from defaulting.

Lonmin and Sibanye predict 12,600 Lonmin jobs will be cut in the next three years as expensive production is wound down and layoffs are a central issue for competition approval in South Africa, where unemployment runs at about 28 percent.

However, if the merger were delayed or blocked it could place all Lonmin’s 33,000 jobs at risk, Lonmin Chief Executive Ben Magara said on Monday after its results.

Additional reporting by Arathy S Nair in Bengaluru and Peter Hobson in London; Editing by Dale Hudson and Alexander Smith