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Here’s How Lynas (ASX:LYC) Responded To The Wesfarmers (ASX:WES) Bid

The Lynas Corporation Ltd (ASX:LYC) share price could come under pressure after the rare earth miner responded to Wesfarmers Ltd (ASX:WES) takeover bid. 

The Lynas Corporation Ltd (ASX: LYC) share price could come under pressure after the rare earth miner responded to Wesfarmers Ltd (ASX: WES) takeover bid.

Wesfarmers is a 100 year-old conglomerate which at various times has owned and operated some of Australia’s largest retail brands such as Kmart, Target and more. Today, its largest business is Bunnings Warehouse, the number-one DIY home improvement business.

Lynas is a ‘rare earth’ miner with two major operations in Western Australia and Malaysia. Its materials are used in products like high powered magnets, wind turbines, catalytic converters, oil cracking and hybrid motor vehicles.

What Lynas said to Wesfarmers

Yesterday we learned that Wesfarmers had launched an ambitious takeover bid for rare earth miner Lynas at a price of $2.25 per share which was a 44.7% premium to the previous closing price.

The idea behind the bid was that Wesfarmers can utilise some of its ‘downstream’ processing assets to create synergies between the companies.

Lynas outlined that the Board had evaluated the indicative non-binding and highly conditional proposal and concluded that it will not engage with Wesfarmers on the terms outlined in the bid.

To get to this conclusion Lynas’ board said that it considered the company’s extensive knowledge of stakeholder interests, and current market and operating conditions. The company’s board also consulted with its advisers about the terms of its proposal and validated its view as to its value.

As a way to promote its worth, Lynas said it’s a unique company and its value is derived from being the only only rare earth miner and processor outside of China, the Mt Weld ore body is a Tier 1 long life high grade asset and that Lynas has substantial in-house capabilities and intellectual property.

What happens next?

Wesfarmers hasn’t yet given an official response, but it depends on how much more Lynas is expecting in terms of an increased bid. Wesfarmers may have expected a bit of negotiation but the benefit of the deal would be reduced if Wesfarmers has to overpay to buy the assets.

I think there are better reliable businesses on the ASX compared to Wesfarmers due to its dependence on retail shopping, such as the proven shares in the free report below.

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