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Union appeal over Sibanye Gold-Lonmin merger dismissed by competition court

The Competition Appeal Court of South Africa dismissed an appeal by the Association of Mineworkers and Construction Union to halt the merger between Sibanye Gold Ltd., which trades as Sibanye-Stillwater, and Lonmin PLC, with the union saying the deal would lead to 13,344 retrenchments.

The deal is expected to become effective June 7 and values Lonmin at £226 million after the two companies agreed in late April to an increased share ratio. When first announced in December 2017, the deal valued Lonmin at about £285 million.

Sibanye and Lonmin said May 17 that the appeal court upheld the November 2018 decision by the Competition Tribunal to approve the merger subject to conditions, which included a six-month moratorium on retrenchments and a requirement for a final number on job losses due to discrepancies in papers filed before the Tribunal.

The court also introduced a new condition that clarifies a measure used as part of the investigation and implementation of certain mining projects.

Lonmin CEO Ben Magara recently said the company would reduce or delay job cuts due to a boost in revenue as a result of higher palladium prices and a weaker South African rand, with planned 2019 layoffs reduced to 4,000 from 5,300.

South Africa's Public Investor Corp. has a 30% interest in Lonmin and may present another hurdle for the merger with concerns about the value of the deal decreasing since it was announced due to a drop in the Sibanye stock price, Bloomberg News reported May 17, citing an anonymous source familiar with the matter.

The state-owned asset manager has sufficient shareholding to block the deal when it is considered by shareholders at a May 28 meeting.

If so, it would be a blow to both companies, with Sibanye and Lonmin both previously indicating to competition courts that Lonmin could cease to operate without the deal.

Sibanye-Stillwater CEO Neal Froneman said in the statement that the company believes the deal will enable a more sustainable future for the companies' platinum group metals operations.