WA miner Lynas has ‘no regrets’ in Wesfarmers takeover fight

The head of the world's biggest rare earths producer outside of China has "no regrets" defending her company against an unsolicited takeover bid by corporate giant Wesfarmers in 2019, despite the efforts eroding its profits.

Wesfarmers made a highly conditional $1.5 billion offer for WA miner Lynas Corporation in March 2019, while the company was in the middle of a crisis over the renewal of its licence to operate its Malaysian processing facility.

Lynas’ Mount Weld mine in Western Australia, the richest known rare earths deposit in the world.Credit:Bloomberg

The offer was swiftly rejected by Lynas who felt the valuation was underdone and the company fought it. Wesfarmers eventually scrapped the offer in August.

Lynas reported a marginal half-year revenue increase to $180.1 million but a profit plunge of nearly 80 per cent from $19 million in 2018 to $3.9 million.

Lynas chief executive and managing director Amanda Lacaze placed some of the blame on the Wesfarmers defence.

She did not disclose how much was spent but described the saga as frustrating and with the company forced to pay for company valuations, advisors, media and legal fees.

"I've reflected on how can you find a different way to do this but when somebody else makes an unsolicited offer to buy a company there are a series of expenses generated as a result of that in the defence of the company," she said.

"It is very frustrating when you're the target because you end up spending this money and you're not adding any value in the business but it is the way public markets work.

"I've thought about this and I just can't see any way around it."

Ms Lacaze said the Wesfarmers offer was "found wanting" and fighting it was the right thing to do.

"For us, we certainly have no regrets," she said.

"We run the business to create shareholder value and whilst everyone in the market is facing some challenges right now, our assessment and the conversation we had with our shareholders is that best value creation comes from having the business as a pure play"

Other impacts on Lynas profits included weaker market conditions and a $11.6 million security bond payment to Malaysian regulators and ongoing costs associated with defending the company against environmental activists that oppose the Malaysian plant.

Lynas shares soared 19 cents to $2.09 on Thursday after news the Malaysian government approved a new three-year licence for its plant that allowed the company to continue processing rare earths.

Those gains were lost on Friday after the results hit the market, which was already in a tailspin thanks to Coronavirus fears.

Lynas said the production of Neodymium and Praseodymium, used in magnets, fell more than 10 per cent for the half-year to 2512 tonnes, while rare earth oxide production dropped 22 per cent to 7518 tonnes.

with Reuters

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