Join our daily newsletter At The Bell to receive exclusive market insights
- Rare earths miner Lynas and company conglomerate Wesfarmers have probably been eating up the business section of your morning paper since March, after Wesfarmers offered $1.5 billion to buy out Lynas
- Yesterday afternoon, news of Wesfarmers officially scrapping the deal broke and the company promptly put out an ASX release to shareholders
- Despite Lynas making an effort to handle political and social pressures in Malaysia for its processing plant, including radioactive waste dumping, Wesfarmers claims it has no intention to pursue the deal any further
- Wesfarmers’ shares are looking fine today since the latest development, trading 1.41 per cent higher, while Lynas has taken a 5.37 per cent hit to its share pricing, depreciating to $2.29 apiece
Wesfarmers announced in yesterday’s waning afternoon hours it has pulled the plug on a billion dollar bid to buy rare earths miner Lynas.
The deal has been in the talks since Wesfarmers offered the $2.25 per share, or $1.5 billion total, buyout in March earlier this year.
After long anticipation, news of Wesfarmers pulling the plug made its way to the public Thursday afternoon. Shortly after, the company made an official statement to the ASX.
“Wesfarmers has been unable to progress its proposal and does not intend to pursue it further,” read the company’s media release yesterday.
Wesfarmer Managing Director Rob Scott himself left a brief statement attached.
“Wesfarmers remains focused on delivering value to its shareholders through disciplined capital allocation within our divisions and when considering new investments.”
What went wrong?
Below surface, the Lynas-Wesfarmers story has been one full of gossip and speculation.
Things started to get interesting when Wesfarmers was caught meeting with government officials, allegedly discussing Lynas’ Malaysian processing plant behind the company’s back.
Lynas wasn’t exempt from its own controversy, however, amid talks of low level radioactivity coming out of the company’s processing plant — using concentrates from the Mt Weld Mine in Laverton, WA.
But what ultimately prompted the scrapping of the deal? Most speculators are pointing their fingers at Lynas’ operations licence renewal for Malaysia yesterday — described as ‘short term’.
The ‘Lynas Advanced Material Plant’ has divided locals in Malaysia, after it was granted approval to dump off radioactive waste.
Outside of China, the rare earths miner is the world’s top contender for producing resources important in manufacturing electric vehicles, smartphones, permanent magnets, and even wind turbines.
Lynas uses its processing plant in Malaysia to significantly undergo cheaper costs when making use of the Aussie minerals.
Despite the political controversy and government hoops, Wesfarmers stated today its decision to no longer pursue the deal was “not withstanding” the situation of the plant’s licence in Malaysia.
How have shareholders reacted?
Out of the two companies this morning, Wesfarmers comes out on top trading 1.41 per cent higher at around midday AEST. The company opened its shares on the ASX this morning at $39.19 and now trades for $39.45 apiece.
Lynas, on the other hand, has taken a considerable hit from shareholders biting back. The company’s shares have depreciated by 5.37 per cent to trade at $2.29 each; a small disappointment after the company managed to briefly spike immediately after open.
It’s unlikely that Westfarmers will be losing sleep over this scrapped deal. The company still managed to add two major acquisitions to its portfolio this year, including lithium-focused Kidman Resources for $780 million and online retailer Catch Group for $230 million.
