March 29, 2019 / 4:56 AM / 8 months ago

Australia's Wesfarmers hints takeover battle for Lynas not over

MELBOURNE/SYDNEY (Reuters) - Australia’s Wesfarmers Ltd remains keen on buyout talks with rare earths miner Lynas Corp Ltd, the retail-to-chemicals conglomerate said on Friday, despite its A$1.4 billion ($992 million) approach being rejected earlier this week.

FILE PHOTO: Rare earth oxides praseodymium and neodymium are pictured in the final stage of production at Lynas Corp Ltd's Advanced Materials Plant in Gebeng, Malaysia July 3, 2014. REUTERS/Sonali Paul/File Photo

The comments foreshadow an intense takeover battle for the only proven producer of rare earth elements outside China, which has struggled with support from Malaysian regulators for a key processing plant located there.

“We remain keen to work collaboratively with the Lynas board and management team as well as the Malaysian government and regulatory authorities to secure a long-term and sustainable outcome for all stakeholders,” Wesfarmers Chief Executive Officer Rob Scott said in an emailed statement.

Lynas had said on Wednesday that it would not engage with the conglomerate on its “highly conditional” takeover approach.

In the statement, Scott said the 44 percent premium price of its all-cash proposal reflected an expectation that regulatory issues “that have weighed on Lynas for many years” can be solved.

“We look forward to hearing the company’s solution,” he said.

Lynas, which has a mine in Western Australia and an $800 million processing plant in Malaysia, is facing problems getting license renewals for the plant due to concerns over waste storage.

Its shares have risen 34 percent to A$2.09 per share since Wesfarmers’ approach was first made public, well short of the all-cash $A$2.25 per Lynas share conditional deal - reflecting the uncertainty surrounding the deal.

Lynas shareholders have voiced support for management, judging the approach as “very opportunistic” and undervaluing the company, despite its shares almost halving from their May 18 high of A$2.91.

“We have got full confidence in (CEO) Amanda (Lacaze) and her team to deliver the best outcome for her shareholders. Her track record today with stakeholder management has been exceptional,” Ryan Green, a portfolio manager at Greencape Capital, told Reuters.

With 9.2 percent ownership, Greencape is Lynas’s second-largest shareholder, according to Refinitiv Eikon.

“The Malaysian situation needs to be resolved so they (potential buyers) can get a sense of what is fair value in the market, of the growth options.”

A successful takeover would give Wesfarmers exposure to new energy materials, with control of the only proven producer outside China of materials used in everything from electric cars to wind turbines.

Lynas is the first major acquisition attempt for the conglomerate, which has built up a warchest after the sale of its KMart auto business and coal mine assets, and it is unlikely to give up easily, sources said.

“It is early days,” a source with direct knowledge of the situation said, asking not to be identified because the person was not authorized to speak to the media.

Reporting by Paulina Duran in Sydney and Melanie Burton in Melbourne; Editing by Stephen Coates

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