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.
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.
For Money Morning