Lynas’ rejection of takeover bid good for Malaysia, says MP

Lynas says the biz is not for sale as it believes it can deliver more value in the form it operates now, says CEO

by NG MIN SHEN / graphic by TMR

LYNAS Corp Ltd’s rejection of a takeover bid by Australian conglomerate Wesfarmers Ltd is a blessing in disguise for Malaysia as it would not disrupt any legal process the company is dealing with, particularly the removal of waste stored on-site at its plant in Gebeng, Pahang.

Kuantan MP Fuziah Salleh said Lynas’ rejection of the takeover bid is only expected as Lynas is now planning to build a processing plant in Western Australia, as reported by Sydney Morning Herald yesterday.

“Luckily for Malaysia, Wesfarmers’ bid for Lynas did not go through. If Wesfarmers went ahead, it would be very hard for Malaysia to hold the new owner to the agreements signed,” Fuziah told The Malaysian Reserve.

The rare earths miner on Tuesday rejected Wesfarmers’ A$1.5 billion (RM4.34 billion) buyout approach, with Lynas CEO Amanda Lacaze reportedly calling the proposal opportunistic and too low.

“I don’t think they will sell,” Fuziah said, pointing to the Sydney Morning Herald report which stated that Lynas could also be looking to expand its processing operations outside of Malaysia, Lynas currently operates a processing plant in Kuantan, Pahang, which has long been embroiled in controversy due to the accumulation of radioactive waste stored on-site at the plant.

On Monday, Lynas said it had received an “unsolicited” proposal — described as “highly conditional, indicative and non-binding” — from Wesfarmers to fully acquire the company for A$1.5 billion in cash.

Wesfarmers said separately that the bid was at a 44.7% premium to Lynas’ last closing price.

Notably, it also said any transaction would remain subject to various matters, including “ensuring that relevant operating licences in Malaysia are in force and will remain in force for a satisfactory period following completion of the transaction”.

Lynas later released a statement, formally rejecting the takeover bid, noting that the group had evaluated the offer and concluded that it would not engage with Wesfarmers on the terms outlined.

Wesfarmers is mainly involved in retail, chemicals, fertilisers, coal mining and industrial and safety products. It is well-known as the operator of home improvement retailer Bunnings Warehouse, as well as for its takeover and successful turnaround of the Coles Supermarkets Australia Pte Ltd business in 2007.

In interviews with Bloomberg and The West Australian afterward, Lacaze added that “the business is not for sale” as the company believes it can “deliver more value in the form that we operate at present”.

She also said Wesfarmers, which declared that it is “uniquely placed” to support Lynas’ future through further capital investment, first approached Lynas in August 2018, although Lynas ended the discussions “as it became clear that their intentions were different”.

The mining firm is currently facing problems obtaining licence renewals for its operations in Malaysia, after the government stated in December last year that the firm must first remove its radioactive waste from the country, as per its commitment made in 2012.

Lynas, the only rare earths miner outside of China, has been operating the Lynas Advanced Materials Plant (LAMP) in Kuantan, Pahang, since 2012. Apart from LAMP, its other major operation is a mining and concentration pit in Mount Weld, Western Australia.

According to the Energy, Science, Technology, Environment and Climate Change Ministry, the radioactive residue from LAMP has accumulated since 2012 and stored at a temporary residue storage facility, which poses serious risk to the surrounding communities and environment.

The group, with its temporary storage licence expiring in September this year, said the Malaysian government’s condition for the group to export the residue is “unachievable” by the given deadline, adding that it continues to engage the Malaysian authorities on the licence renewal situation.

According to the report, Western Australia’s Environmental Protection Authority (EPA) confirmed it had met recently with Lynas to discuss approvals in the state.

The article quoted an EPA spokeswoman as saying the discussions are preliminary and “no formal submission for any change has been presented to the EPA”.

Analysts were less than enthusiastic on Wesfarmers’ bid for Lynas, with CLSA Ltd analyst Dylan Kelly calling the offer price “far too low” and that other bidders would likely pay more.

Bank of America Merrill Lynch analyst David Errington said the proposed acquisition of Lynas was underwhelming, although Credit Suisse Group AG analyst Grant Saligari said the move was in line with the conglomerate’s “approach of looking at businesses with favourable industry characteristics and potentially mispriced on short-term factors”.