Miner Xstrata today launched a £5.1 billion cash bid for platinum producer Lonmin.
The deal stands at £33 a share – a 42 per cent premium on the Tuesday closing price of £23.19.
In response the platinum producer’s share price rose 46.53 per cent at 8:39 BST to £33.94.
Xstrata claims its own platinum mining operations put it in the position to “turn around Lonmin’s operations”.
The Anglo-Swiss firm also claims the offer is an “opportunity for Lonmin shareholders to realise significant cash premium at a time of ongoing operational challenges”.
However, Lonmin has strongly rejected the bid.
A statement from the firm read: “This is an opportunistic and entirely unwelcome attempt to acquire Lonmin at a price which undervalues its unique assets.
“Shareholders are strongly advised to take no action in respect of the pre-conditional offer.
Mick Davis, Xstrata chief executive, said “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.
“An unrivalled combination of operational synergies, relevant experience and skills and a track record of turning around underperforming operations to create value, position Xstrata as the natural owner of the Lonmin assets.”
The deal will be funded by a mixture of cash at hand and bank debt.
Lonmin’s results out today show a two per cent attributable profit rise to $2.829 billion. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) stood at $5.7 billion.
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