Glencore to spin off its stake in Lonmin

Move by Swiss trader could flush out bidder for stake in South African platinum producer

Glencore has decided to spin off its stake in Lonmin, a troubled South African platinum producer, in a move that could flush out a bidder for the 23.9 per cent stake.

Swiss commodities group Glencore came to own its stake in Lonmin through its $68 billion acquisition of Xstrata in 2013, and Ivan Glasenberg, chief executive, has on several occasions described the holding as "non-core".

People familiar with the situation said that Glencore had previously received some expressions of interest in its Lonmin stake and, by announcing plans to divest the holding via an in specie distribution, it could revive bids from potential buyers. Under the proposal Glencore shareholders will be given Lonmin stock in proportion to their stakes in the company.

Glencore said that distributing its Lonmin shares in this way would be a better option for shareholders than a straight market disposal – which traders suggested would be difficult to pull off at anything other than a deeply discounted price.

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Glencore’s plan to spin off the stake by the end of June came as it announced plans to slash spending on its mines in 2015 to between $6.5- $6.8 billion, down from an expected $7.9 billion. Like its peers, Glencore has been hit by falling commodity prices. Crude oil has halved in price since June, while the price of copper has fallen almost 20 per cent.

Rivals

Several of Glencore’s rivals have already announced plans to slash spending on new and existing mines, and more are expected to follow. Glencore said it would provide further details of its spending plans with full-year results next month, and it expected to focus on oil and thermal coal.

Glencore is believed to have been opposed to Xstrata’s decision to buy the stake in two market transactions back in 2008. Xstrata paid £33 a share for its initial 10 per cent stake and £19.79 for the balance. – Copyright The Financial Times Limited 2015