Miner Xstrata launched a $10 billion takeover bid this morning for Lonmin, the world's third-biggest platinum producer, to further diversify and grow its business.
Xstrata, the fifth-largest mining group by market value, said it planned to launch a cash offer at £33 a share, a 42 per cent premium to Lonmin's closing share price yesterday.
"Today's announcement marks the next step in our strategy to develop a significant platinum business and add further scale and diversification to our portfolio," chief executive Mick Davis said.
Xstrata also posted a 2 per cent rise in first-half attributable net profit of $2.83 billion, higher than a consensus forecast of analysts polled by the firm of $2.65 billion.
Anglo-Swiss Xstrata said it had the expertise to turn around the South African mines owned by Lonmin, which has repeatedly cut its production targets due to operational problems, smelter difficulties and power shortages.
Xstrata, which said it had already bought 8 per cent of Lonmin shares, said it planned to fund its proposed offer through existing cash and bank debt.
Lonmin has been turning robust profits, boosted by record platinum prices. But in the past few months platinum prices have fallen by a third to $1,562 an ounce from a record $2,290 in March, dragging Lonmin shares with them.
Lonmin shares have shed 36 per cent since touching a peak on May 19th and closed yesterday at £23.19.