Wesfarmers plans takeover of lithium firm Kidman
Wesfarmers is eyeing the shift to electric vehicles as it plans a $776m takeover of lithium firm Kidman.
Wesfarmers says it plans to buy lithium company Kidman Resources in a deal worth roughly $776 million.
The deal marks a doubling down of Wesfarmers’ efforts to boost its exposure to a suite of emerging minerals that are critical in the manufacture of high-tech products including battery storage, semi conductors and mobile phones.
Only five weeks ago, Wesfarmers announced its intention to acquire Lynas, one of the only companies outside China producing rare earths used in batteries and magnets for hybrid cars and wind turbines. Lynas said it wouldn’t negotiate with Wesfarmers on the terms it had outlined.
Wesfarmers said today it will offer $1.90 a share for Kidman, whose directors and major shareholders intend to support the proposal. The offer price is a 47 per cent premium to Kidman’s closing price yesterday.
Wesfarmers chief Rob Scott says the Kidman takeover is aimed at taking advantage of the global shift to electric vehicles. Lithium is a key component of electric vehicle batteries.
“The acquisition of Kidman provides an opportunity to invest in and develop a large-scale, long-life and high-grade lithium hydroxide project in Western Australia,” he said.
Kidman owns a 50 per cent stake in the Mt Holland lithium project in Western Australia. The remaining interest is owned by Chilean lithium giant SQM. That company has also signalled its support for Wesfarmers’ proposal, Wesfarmers said.
The push into commodities by Wesfarmers follows the recent spin off of the retail and industrial company’s Coles grocery business, Australia’s second-largest supermarket chain by market share behind Woolworths.
Wesfarmers also recently sold an interest in an Australian coal mine.
Kidman said Wesfarmers has been granted an exclusive period for due diligence access to its books until May 29.
Wesfarmers’ $1.5 billion takeover proposal for Lynas was the single biggest acquisition attempt to date by Mr Scott.
However, the progress of the deal has been far from smooth with growing hostilities between the suitor and its target over whether Wesfarmers overreached in holding discussions with the Malaysian government over its deal.
The prize in the Kidman deal is lithium, a key component in battery technology, which is expected to be in high demand as storage becomes a bigger feature in the energy industry.
The hype has of late proved difficult to sustain for Australian producers including Kidman. After trading at $2.30 a year ago, Kidman shares have steadily fallen by nearly half to just $1.29, partly due to a chorus of scepticism from bears who have long predicted brewing oversupply of the mineral in the global market.
Still, Kidman continues to ride the boom in demand. In December it signed a preliminary deal to supply lithium to South Korea’s LG Chem from its Mount Holland project in Western Australia after previously sealing supply pacts with Elon Musk’s Tesla and Mitsui & Co.
Its Mount Holland project is being developed by Covalent Lithium, a 50-50 joint venture with SQM.
with Dow Jones Newswires