Wesfarmers has made a $1.5 billion indicative offer for rare earths miner Lynas Corporation, its first takeover bid since its ill-fated $705 million purchase of Homebase in the UK in February 2016.
Wesfarmers has made a $1.5 billion indicative offer for rare earths miner Lynas Corporation, its first takeover bid since its ill-fated $705 million purchase of Homebase in the UK in February 2016.
The all-cash offer at $2.25 per share is a 44.7 per cent premium to Lynas's previous closing share price of $1.56.
The Lynas share price has been highly volatile over the past year, reflecting regulatory issues it has faced in Malaysia and its inconsistent financial results - they have traded as high as $2.90 in May last year and as low as $1.50 in January.
They spiked 35 per cent today to $2.10, just below the pricing of Wesfarmers' indicative proposal.
Wesfarmers freed up substantial capital for acquisitions after the demerger and initial public offering of Coles in November, as well as the sale of the Bengalla coal mine, Kmart Tyre and Auto Service, and Quadrant Energy.
The asset disposals added more than $3 billion to its half-year profit reported last month, with some of the proceeds returned to shareholders through a $1 per share special dividend.
Wesfarmers said it was uniquely placed to support Lynas’ future through further capital investment to support downstream processing assets and realise the full potential of the Mt Weld ore body.
The Perth conglomerate added that it offered highly complementary mining and chemical processing expertise - a reference to its CSBP business - and a track record of working well with diverse government and other stakeholders.
“An investment in Lynas leverages our unique assets and capabilities, including in chemical processing, and will deliver Lynas’ shareholders with an attractive premium and certain cash return,” managing director Rob Scott said,
“We also acknowledge the importance of the Lynas advanced materials plant in Malaysia and the strong contribution made by Lynas’ management team and its employees across all operations," he added.
In a statement, Wesfarmers said a deal for Lynas would be dependent on a number of factors, including whether the miner's licences in Malaysia would remain in force for long enough after the acquisition.
Lynas's Malaysian licence is up for renewal in September and that country's Atomic Energy Licensing Board has previously ordered Lynas to remove stockpiles of radioactive waste from the $800 million plant.
However, last month Lynas said it would unable to do so within the timeframe requested by the government agency.
Lynas is the only major rare earth elements miner in the world outside of China.
Shares in Wesfarmers were down 3.65 per cent to trade at $33.75 each at 12.15pm AEDT.
