Lynas Corporation gets a ~$1.5 billion acquisition proposal from ASX-listed Wesfarmers Limited known for its diversified business approach.
On Tuesday, 26 March 2019, a miner announced that Wesfarmers has made an indicative proposal to the Board of Lynas Corporation Limited (ASX: LYC) to acquire all the shares in Lynas at a consideration of $2.25 a share in cash.
Wesfarmers’ intention to acquire the rare earth miner Lynas aligns with the prospective benefits the conglomerate could derive from the synergy of its Industrial Divisions and Lynas processing assets. Its proposal of $2.25 per Lynas’ share puts forward too much of a sweet deal by giving 44.7 per cent premium to the last closing price of Lynas shares and nearly 36.4 per cent premium to the 60-day weighted average price of Lynas to 25 March 2019.
However, the proposal is barred from several conditions which are necessarily required to be fulfilled. It calls for the success of Wesfarmers’ due diligence investigation, the negotiation of a binding Implementation deed, approval by the Board and shareholders of both the companies as well as meeting other customary and regulatory approvals.
Wesfarmers Managing Director Rob Scott stated that Wesfarmers investment in Lynas will allow it to leverage its unique assets and capabilities and deliver an attractive premium and certain cash return to Lynas shareholders.
The conglomerate assured Lynas of its unique capabilities including chemical processing that are well positioned to strengthen Lynas’ future growth through further capital investment in its downstream processing assets and realise the optimum potential of Lynas’ flagship ore deposit- Mt Weld in Western Australia.
The offer looks highly complementary to Wesfarmers given its mining and chemical processing expertise and a strong track record of delivering a sustainable and positive outcome to the local community, Government and other stakeholders.
Lynas further informed that a transaction would also remain subject to ensuring that relevant operating licences in Malaysia are in force and will remain in force for a satisfactory period following completion of the transaction. However, there remains the uncertainty of completion of the transaction and that the Indicative Proposal will lead to an agreed transaction.
In the concluding statement, Scott stated that “Wesfarmers duly identifies the significance of the Lynas Advanced Materials Plant in Malaysia and the contribution made by LYC’s management team and its workforce across all the operations. Wesfarmers further expects Lynas’ employees to continue in their respective roles post-acquisition.”
As the acquisition news surfaced among the investors, Lynas’ stock price sky-rocketed from flat early-day trading to as high as 33.119% gains in mid-day trade. The stock is currently trading at $2.070, up $0.515, on 26 March 2019 (1:16 PM AEST).
LYC is trading at a price to earnings multiple of 127.460 x with a market capitalisation of $1.04 billion. Over the past 12 months, the stock has witnessed a negative performance change of 37.30% including a dip of 0.96% recorded in the last three months.
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