Wesfarmers Ltd (ASX: WES) has released an update on its acquisition of Kidman Resources Ltd (ASX: KDR) this morning and it looks likely to go ahead.
About Wesfarmers and Kidman
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.
Kidman’s major asset is a 50% interest in the Mt Holland lithium project based in Western Australia, which is jointly owned with one of the world’s largest producers and makers of lithium products, Sociedad Quimica Minera De Chi (NYSE: SQM).
What You Need to Know
Wesfarmers made an announcement early in May 2019 which was a proposal to acquire Kidman at a price of $1.90 per share, or a total value of around $776 million. The takeover offer represents a 47.3% premium to Kidman’s closing price the day before the announcement.
Today’s announcement states that Wesfarmers has completed its period of due diligence and Kidman and Wesfarmers have entered into a Scheme Implementation Deed.
The original details regarding transaction price remain the same. According to the announcement, Kidman’s Directors and major shareholders are in support of the Scheme and will vote in favour of it, absent a superior offer.
Kidman Chairman John Pizzey said the acquisition would create value for shareholders.
“We are pleased to recommend this attractive all-cash transaction with Wesfarmers to our shareholders”, he said.
“Kidman’s focus has been to create value for shareholders through the development of a leading Australian integrated lithium project and we have made significant progress towards achieving this goal.”
The acquisition is still subject to several conditions, including Kidman shareholder approval, court approval, an independent expert’s report and, “no material adverse change” to the company’s position.
If it all goes to plan, the first court hearing will take place mid-July and implementation will occur early September this year.
Is This A Good Move for Wesfarmers?
This Rask Media article highlights some of the risks of the acquisition.
Despite the risks, it seems investors are positive about the transaction, with the Wesfarmers share price gradually moving higher since the original announcement.
Ultimately, I think Kidman shareholders will see the most benefit from this deal.
3 Proven, Dividend-Paying Shares
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
