MELBOURNE • Lynas Corp rebuffed a hostile A$1.5 billion (RM4.34 billion) takeover approach, with the rare earths company arguing it can perform better under current management to resolve regulatory hurdles in Malaysia and consider further growth.
The proposal by Wesfarmers Ltd for the producer of specialist materials used in magnets for smartphones and vehicles was opportunistic and too low, Lynas CEO Amanda Lacaze said yesterday in a phone interview.
Her company had held some “polite and courteous” discussions with its suitor in August, before the hostile approach on Tuesday, she said.
“We believe we can deliver more value in the form that we operate at present, and that’s why the business is not for sale,” Lacaze said.
“We always will talk to people with an interest” in the business or in potential partnerships that could deliver additional value, though Lynas isn’t currently pursuing any such talks, she said.
Wesfarmers offered A$2.25 cash a share — almost a 45% premium to Monday’s close — in a non-binding proposal on Tuesday, and said it had the potential to invest in the target’s mine and processing facility.
It’s likely other bidders will now come forward with higher offers, according to CLSA Ltd.
“There is life after the schoolyard bully having a go at us,” she said. “We continue to look at our business and understand how we can grow with the market.”
The move from Wesfarmers, an Australian conglomerate, came after Lynas shares fell more than 40% since May as the company grappled with weaker prices and regulatory hurdles in Malaysia.
Licensing issues have crimped some output and placed doubts against the company’s ability to operate its manufacturing facility near Kuantan, the world’s largest rare earths processing plant.
“We see political risk in Malaysia as a major factor with uncertainty around whether Wesfarmers can earn a satisfactory return on the acquisition,” Morgans Ltd said in a note, adding that a revised offer was likely if the process progressed.
Lynas is “engaged in constructive discussions” aimed at resolving remaining risks to the processing plant, Lacaze said. Local authorities have demanded the company makes changes to its handling and disposal of some waste products, including some very low-level radioactive material.
The producer, the key source of rare earths outside China — which accounts for more than 70% of mined supply, is continuing to consider options for potential expansions.
Demand is seen as rising, boosted by adoption of electric vehicles, that use the materials in motors and sensors.
Lynas is regarded as crucial to ensure industries in Japan, Europe and the US have access to a supply source outside China, where authorities have in the past flexed exports to support prices and recently imposed new quotas on mine output. — Bloomberg