Wesfarmers sows rare earths seed
Rare-earths miner Lynas could emerge as the new ‘hero’ within the Wesfarmers conglomerate if a $1.5bn takeover bid succeeds.
It can be hard to make a name for yourself in a company with a corporate history as long and as deep as Wesfarmers’, but for chief executive Rob Scott a $1.5 billion takeover bid for a miner that is involved in the super-future commodity of rare earths is a pretty good place to start.
Wesfarmers traces its lineage back to 1914 when a group of farmers got together to create a co-operative to assist in the growing and marketing of agricultural produce, but soon sprouted many branches that would emerge as a modern conglomerate with interests in a range of businesses, including mining, retail, insurance and chemicals.
Scott could be considered a “Johnny come lately” when set against the century-old story of Wesfarmers, only first joining the Perth-based business in 1993 and then leaving to become an investment banker and later returning to the fold in 2004 in a commercial role in business development.
Now with his hands firmly on the steering wheel as chief executive since November 2017, Scott has shown a willingness to act decisively and quickly to refashion the company’s investment and operational portfolio. And he is certainly doing deals at a rapid rate.
He has already sold 85 per cent of Coles in its historic demerger last year, dumped the failing Bunnings UK experiment and has disposed of Wesfarmers’ coal assets to leave Wesfarmers still dominated by its retail assets, namely one of Australia’s most successful retail chains, Bunnings.
If his bid for Lynas is successful the management of the rare-earths miner and processor will find themselves sharing benches at strategy days and corporate retreats with hardware salesmen, general merchandise executives from Kmart and Target and a smattering of other executives drawn from the fields of chemicals, financial services, timber and property.
It should make the icebreakers and team challenges more fun, before they all get down to the serious work of staring at presentations written on butchers’ paper and mapping out strategic goals.
For Scott himself it is his opportunity to place his mark on the Wesfarmers group while giving it an inroad into the futuristic industries of batteries, micromotors for computers and acoustic devices such as earphones and speakers. In many ways rare earths are the backbone of the renewables industries when it comes to batteries and other efficient forms of energy storage like fluorescent lighting. Rare earths are the future if you believe the hype that fossil fuels are the past.
It is a far cry from the supermarket aisle and the fairly mundane business of selling groceries to shoppers, and although Scott has made sure Wesfarmers kept a stake in Coles when it was listed as an independent company, through the Lynas deal it shows where the CEO thinks Wesfarmers growth will come from.
This is especially important at a time when the latest earnings results showed weaker-than-usual profit growth from Bunnings which for decades has trounced all retailers before it with mouth-watering high growth rates no matter the wider economic settings.
Now with Bunnings potentially facing slower profit expansion at this time of the cycle, which could get worse if there is a sustained slowdown in the housing and construction sectors, Lynas could emerge as the new “hero” within the Wesfarmers conglomerate.
Other CEOs and managers within Wesfarmers portfolio businesses will need to make room at the table for Lynas, as the tussle over capital investment allocation from Scott’s head office becomes just a tad more difficult in the face of a surging rare-earths industry.