The Lynas Corporation Ltd (ASX: LYC) share price is set to charge higher on the ASX when it emerges from its trading halt after Wesfarmers Limited (ASX: WES) put forward a $1.5 billion cash takeover offer this morning.
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.
How did Lynas Corp respond?
Lynas responded to the unsolicited, highly conditional, non-binding indicative takeover offer by telling its shareholders to take no action. Other than that Lynas really didn't say much, with management basically sitting tight while they review the indicative proposal with plans to update shareholders as soon as possible.
Why will the Lynas share price surge?
Wesfarmers' bid has surprised many in the market as it hopes to leverage its chemicals and engineering expertise to extract some serious synergistic benefits from the Lynas acquisition.
The Lynas share price should surge higher this afternoon as it re-emerges from its trading halt based on that cash valuation of $2.25 per share, while the Wesfarmers share price is headed in the other direction.
Given the historical performance of acquiring firms post-transaction, the Wesfarmers share price has fallen nearly 4% at the time of writing to be amongst the top ASX losers today.
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.
