02/05/2019 - 08:43

Wesfarmers makes $776m bid for Kidman

02/05/2019 - 08:43

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Wesfarmers has made a second takeover bid for a miner, with a $776 million proposal for lithium company Kidman Resources, as it seeks to benefit from the global uptake of electric vehicles.

Wesfarmers makes $776m bid for Kidman
Rob Scott says Kidman is an attractive investment that will benefit from the global uptake of electric cars.

Wesfarmers has made a second takeover bid for a miner, with a $776 million proposal for lithium company Kidman Resources, as it seeks to benefit from the global uptake of electric vehicles.

The conglomerate launched an indicative, non-binding and conditional offer of $1.90 cash per share, which represents a premium of 47.3 per cent to Kidman’s previous closing price before the offer of $1.29 per share.

The lithium company’s major shareholders, board members and key management, which together own around 17 per cent of its shares, have indicated they will back the bid.

But the board has still told shareholders not to take any action at the current time.

Melbourne-based Kidman’s flagship asset is a 50 per cent interest in the Mt Holland lithium hydroxide project, which it owns jointly with Sociedad Quimica y Minera de Chile S.A. (SQM).

Mt Holland is located 110 kilometres southeast of Southern Cross in the Goldfields region.

SQM is one of the world’s largest producers and marketers of lithium products.

The project includes the construction of a mine and co-located concentrator at Mt Holland, and a lithium hydroxide refinery in Kwinana.

In October, a pre-feasibility study for the Mt Holland project forecasted a capital cost of $849 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $31.33 billion over a 47-year mine life.

Construction of the project is expected to commence next financial year and first production of lithium from the refinery is expected in the 2022 financial year.

According to BNIQ data, it will be the fourth lithium hydroxide plant in WA, with Tianqi’s $700 million Kwinana plant, Albermarle and Mineral Resources’ $2.2 billion Wodgina refinery, and Albermarle’s $1 billion-plus Kemerton plant.

Wesfarmers managing director Rob Scott said the proposed acquisition of Kidman would provide an attractive investment in a project that would benefit from the global uptake of electric vehicles.

Mr Scott also said the acquisition would draw upon the ability of the company’s chemicals, energy and fertilisers business to design, construct, commission and operate complex chemical plants.

“The proposed acquisition is consistent with our objective of deploying capital in areas where we can deliver attractive returns to our shareholders by leveraging our existing strengths and capabilities,” he said.

“It will underpin the development of the Mt Holland lithium project and deliver Kidman’s shareholders an attractive premium and certain cash return.”

SQM chief executive officer Ricardo Ramos welcomed Wesfarmers’ proposed acquisition of Kidman and investment in the Mt Holland lithium project.

Wesfarmers has significant local infrastructure, experience and capability in chemical processing that will be ideally suited to the ongoing development of the Mt Holland lithium project,” he said.

“We look forward to a long and successful partnership with Wesfarmers,” Mr Ramos said.

Kidman is being advised by Greenhill & Co as financial adviser and Maddocks as legal adviser.

The bid for Kidman comes just over a month after Wesfarmers launched a $1.5 billion hostile takeover offer for rare earths miner Lynas Corporation.

The all-cash Wesfarmers offer at $2.25 per share was a 44.7 per cent premium to Lynas's previous closing share price of $1.56.

Lynas rejected the offer a day after it was made, and said its company was "unique" and its "value is derived from strong, irreplaceable assets" as the only significant rare earths miner and processor outside China.

Shares in Kidman surged 42.4 per cent to trade at $1.84 per share at 11amAEDT.

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