Swiss miner ends U.K. takeover bid because of financial uncertainty

Swiss mining giant Xstrata PLC is dumping its $9.4-billion US takeover bid for Lonmin PLC, citing uncertainty in global credit markets.

Xstrata, which launched a hostile bid for the London-based platinum miner in August, said Wednesday it might have trouble getting bridge financing at sufficiently advantageous terms to make the buyout economical. 

"The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata," CEO Mick Davis said in a release.

Essentially, Xstrata would need to refinance a large portion of its initial takeover price within 12 months, the company said.

The current uncertainty in global credit markets, however, means that the firm might face significantly higher interest charges or a capital shortage when that time comes.

Mining meets Wall Street

Xstrata's takeover is the latest casualty in the U.S. financial meltdown as lending institutions continue to reduce their portfolios to limit exposure in uncertain markets.

As venerable companies, such as Merrill Lynch and Washington Mutual, are either taken over or slip into bankruptcy, financing firms have become averse to lending money in many circumstances — whether to fund takeovers or to pay for equipment for startup ventures.

As a result, many firms now face problems finding any money to borrow, or they wind up paying higher-than-expected interest rates to get funds.

Xstrata, the world's fifth-largest mining company, wanted Lonmin, the third-largest platinum miner, to get cost savings by combining operations of its own mines in South Africa with those of Lonmin in the same country.

In the past week, however, investors began betting against Xstrata's financial fortunes. Its shares have dropped 30 per cent since last Wednesday.

Stock buyers are now concerned that Xstrata faces revenue woes as global commodity prices and economic activity both tumble.