Doubts emerge over Wesfarmers Lynas play

A Lynas rare earths plant under construction in Gebeng, eastern Malaysia. Picture: AP

Australian conglomerate Wesfarmers will not lift its offer for rare earths producer Lynas Corporation and has walked away from the $1.5 billion takeover target for good, according to sources.

This is despite the company indicating it remains a suitor.

It comes after Malaysian Prime Minister Mahathir Mohamad last week hinted Lynas would be able to continue operating its controversial processing plant beyond the expiry of its licence in September.

Wesfarmers tabled a $2.25 per share offer for Lynas in March worth $1.5bn, subject to approval from the Malaysian government to renew its operating licence.

But the Lynas board rebuffed the offer, which has been widely considered a hostile approach.

Lynas shares have since soared on the news of its licence approval way above the Wesfarmers offer, gaining 11 per cent on Friday to $3.05.

Any bid would need to be lifted and DataRoom understands shareholders would resist such a move.

Also helping the share price higher is the chance that China will cut off its exports of rare earths to the US amid rising trade tensions between the two.

China dominates the global production of rare earths, which are used in hi-tech applications such as electric vehicles, smartphones and missile systems. Lynas is the largest producer outside China.

Wesfarmers has been considered to be taking a left of field approach in its pursuit of Lynas and some shareholders are uncertain about it.

The company already owns a diverse stable of mainstream businesses such as retailers Target and Kmart. It also has chemicals manufacturing operations in its portfolio, which CEO Rob Scott has gone to lengths to explain to shareholders that it had strong synergies with rare earths.

After bidding for Lynas and approaching the Malaysian government about solutions for disposing of waste at the plant by transporting it to Australia, Wesfarmers has made an attempt to buy another rare earths producer, Kidman Resources, for $776 million.

Analysts in the market have questioned whether the Lynas joint venture partner Sojitz Corp ultimately ends up buying Lynas given the positive relationship between the two parties.

Dr Mahathir told reporters in Japan on Thursday that he wanted Lynas to keep operating its plant in Malaysia’s Kuantan province, a statement that encouraged investors worried about regulatory uncertainty facing the company. There were signals Malaysian politicians could impose about removing mildly radioactive waste to keep the plant open.

It comes as doubts continue as to whether deals eventuate for other takeover targets.

Crown Resorts was subject to a $10bn takeover bid by Las Vegas rival Wynn Resorts that emerged about a month ago, but even though the suitor walked away from the target, Crown was still expected to be in play.

However, last week billionaire shareholder James Packer offloaded almost half his stake for $1.8bn to Hong Kong casino mogul and former partner Lawrence Ho, who heads Melco Resorts & Entertainment.

Some said a sale would have been unlikely if Packer believed suitors remained interested in the company.

Crown shares have since fallen. Mr Packer has reduced his stake from 46.1 per cent to 26 per cent.

Meanwhile, the $3.3bn takeover bid for Vocus Group by EQT Infrastructure is considered far from certain and Bravura Solutions’ bid for GBST looks shaky due to investor concerns that the price put forward by Bravura is too low.