Forget HBOS and Lloyds TSB. The FTSE 100 takeover that was more immediately likely to founder was Xstrata’s proposed £5 billion bid for Lonmin. Today, one day before the “put up or shut up” deadline set by the Takeover Panel, it finally did.

With Lonmin trading one-third below Xstrata’s £33 a share offer, the stockmarket had already reached that conclusion. But while Xstrata cited the credit crunch as its reason for walking away - or “unprecedented uncertainty” in financial markets and the short-term requirement to refinance its acquisition debt facility - it was the secondary effects of economic slowdown that will have been equally as persuasive.

Namely, the summer’s slide in platinum prices that made the deal undoable at £33 a share. On current spot prices, Lonmin’s full-year profits will now be around $127 million - against the annual interest charge of some $600 million that Xstrata would have to pay on the debt. Monday’s departure of Brad Mills as Lonmin’s chief executive only provided additional confirmation that Lonmin’s profits will not be as high as previously hoped.

Xstrata has lost none of its ambitions to build a broadly diversified miner - as evidenced by its move this morning to raid the stockmarket for a further 14 per cent of Lonmin’s shares, taking it to the maximum 25 per cent limit under South African ownership rules.

The problem for Lonmin investors is that, while Xstrata’s blocking stake makes a second bid purely a matter of timing, they risk tying up their cash to little effect in the short term. However, hopes that a new chief executive might make progress in solving Lonmin’s operational problems, and the miner’s low valuation - some 7 times earnings - suggest the shares are worth buying on weakness.

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