The Wesfarmers Ltd (ASX: WES) share price looks set to fall this morning after the Aussie conglomerate announced it has made a conditional, non-binding indicative proposal to acquire Lynas Corporation Ltd (ASX: LYC).
What are the details of the proposal?
Wesfarmers has made a conditional, non-binding indicative proposal to the Board of Lynas to acquire the company for $2.25 per share in cash consideration.
Based on Lynas' current $1.56 per share valuation, the offer represents a 44.7% premium to the last closing price and a 36.4% premium to Lynas' 60-day weighted-average price to 25 March 2019.
The proposal is conditional on Wesfarmers' due diligence and negotiation of a binding Implementation Agreement between the two parties with Wesfarmers seeking to negotiate a Process Deed with Lynas.
What's behind the acquisition?
Wesfarmers believes it is uniquely placed to support Lynas' future through further capital investment to support downstream processing assets and realise the full potential of the Mt Weld ore body.
The conglomerate already has complementary mining and chemical processing expertise within its portfolio and obviously believes it can generate significant synergies from the acquisition of Lynas, despite the takeover premium.
Wesfarmers has been building a war chest of sorts with a significant amount of dry powder following a number of divestments including its Bengalla joint venture stake, Kmart Tyre & Auto Service (KTAS) and the spin-off of Coles Group Ltd (ASX: COL) to name a few.
Where is the Wesfarmers share price headed?
Given the historical performance of acquiring firms post-transaction, I'd expect to see the Wesfarmers share price fall this morning while the Lynas share price should shoot higher on the news of such a lofty valuation.
Wesfarmers is continuing to look for inorganic growth as it builds on its existing conglomerate status, but I'm not convinced that Lynas can provide that given current regulatory headwinds in Malaysia.
For those still looking for ASX growth shares, I'd be checking out this buy-rated stock that could be set to take a new-age $22 billion by storm in the mean
