Lynas Share Price Up after Wesfarmers Acquisition Proposal

At time of writing, shares of Lynas Corporation Limited [ASX:LYC] are up a whopping 35.69%, trading at $2.11 after coming out of a trading halt.

Prior to today it had been a very disappointing year for the Lynas share price, as the company has been dealing with ongoing difficulties with the Malaysian government regarding its processing plant.

Lynas Share Price

Source: tradingview.com

The latest news out of the company is that Wesfarmers Ltd [ASX:WES] has made a move to acquire the company at a significant premium to the current share price.

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Wesfarmers moves on Lynas

Lynas, which mines and processes rare earth elements (typically used in various clean energy solutions), indicated this morning that Wesfarmers has made a proposal to acquire the company.

The terms of the proposal are:

  • Acquire Lynas for $2.25 a share payable in cash, pursuant to a scheme of arrangement (this would be a 44.7% premium to current share price)
  • Conditional on Wesfarmers due diligence;
  • Implementation agreement and approval by both boards
  • Ensuring the Malaysian operation’s licenses will remain in force for a ‘satisfactory’ period after the transaction
  • Regulatory approval, Lynas shareholder approval, and Court approval.

Lynas stressed that there is no certainty that the proposal will result in a completed transaction and that the proposal was ‘unsolicited,’ and ‘highly’ conditional.

That being said, Wesfarmers is offering a significant premium and current Lynas shareholders may be tempted by such an attractive price. Others, however, may want more after seeing the Lynas share price hit more than $20 in 2011.

Why Wesfarmers wants to acquire Lynas

Wesfarmers Managing Director, emphasised that Wesfarmers’ expertise would help the company saying, ‘an investment in Lynas leverages our unique assets and capabilities, including in chemical processing, and will deliver Lynas’ shareholders with an attractive premium and certain cash return.

WesCEF, which incorporates Wesfarmer’s Chemicals, Energy and Fertilisers business, has experienced 14.4% revenue growth recently to bring their revenue to $874 million.

Should the uncertainty around the Malaysian regulatory environment be resolved, Wesfarmers would be acquiring a company that is well placed to take advantage of the clean energy boom.

Regards,

Lachlann Tierney
For Money Morning

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Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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