Wesfarmers bets on electric cars with $776m bid for lithium miner
Wesfarmers has launched a $776 million takeover big for the lithium miner Kidman Resources, in a bet by the conglomerate on the future uptake of electric vehicles globally.
The offer announced on Thursday morning, which comes hot on the heels of Wesfarmers' $1.5 billion bid for rare earths miner Lynas, has won the backing of Kidman's board and its joint venture partner.
Kidman's major asset is a 50 per cent stake in a lithium project in Mount Holland, Western Australia, consisting of an under-construction mine and a lithium hydroxide refinery in Kwinana.
Lithium is an important component in the batteries used in electric vehicles, and Wesfarmers said it wanted exposure to the growing demand for that resource driven by the rising uptake of electric cars around the world.
Wesfarmers, which owns the retail chains Bunnings, Kmart, Target and Officeworks, and last year spun off most of its stake in supermarket chain Coles, is trying to diversify its portfolio away from retail and grow its resources arm.
Kidman's joint venture partner, the Chilean group Sociedad Química y Minera (SQM), which is the world's largest lithium producer, supports the deal.
“The acquisition of Kidman provides an opportunity to invest in and develop a large-scale, long-life and high-grade lithium hydroxide project," said Wesfarmers boss Rob Scott.
"It also creates a unique partnership with SQM, a global leader in the lithium industry with a long operating history and deep market knowledge."
Wesfarmers' offer of $1.90 per share represents a 47.3 per cent premium to Kidman's closing price on Wednesday.
Wesfarmers said it expected to spend another $600 million on developing the mine site, a processing plant and refinery, with construction expected to start in the 2020 financial year and the first lithium hydroxide to be produced in 2022.
Kidman's major shareholders, board members and members of its key management, which together own about 17 per cent of Kidman's shares, also support the takeover, as long as there's no better offer.
But the deal will require the support of Kidman's other shareholders to go ahead.
More to come