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Lynas Corp share price down on Malaysian PM’s comments

The Lynas Corporation Ltd (ASX: LYC) share price is trading 2.50% lower this morning after a response to shock comments made by the Malaysian Prime Minister about the company on Friday.

What was in the announcement?

The company noted comments made by the Malaysian Prime Minister about Lynas at a press conference last Friday.

Prime Minister Mahathir Mohamad said that the government has “opened up the business to other people, and there are other companies willing to acquire Lynas.”

The Prime Minister said that companies that have expressed interest in Lynas have agreed to decontaminate any radioactive materials before bringing them into Malaysia, which has been a sticking point between the government and Lynas’ licence renewal.

It’s been made clear by the Malaysian government that Lynas will need to be in compliance with this removal of radioactive waste if it wants its operational licence renewed in September 2019.

This comes after the recent unsolicited takeover bid made by Wesfarmers Limited (ASX: WES) at a 36% premium to the previous day’s closing price, however, Lynas management rejected the initial bid.

Wesfarmers confirmed that it has discussed its bid for Lynas with the Malaysian government but didn’t put its hand up as the reason behind the Prime Minister’s shock announcement.

Is Lynas in the buy zone?

The recent bid from Wesfarmers saw the Lynas share price skyrocket 39% on 25 March and the company’s shares are currently trading at $2.09 per share.

The company is battling on many fronts, and noted the “material uncertainty” regarding its ability to operate beyond 2 September 2019 given the current negotiations with the Malaysian government.

I’d expect to see Wesfarmers come back with another offer for Lynas, particularly if the share price falls lower on higher regulatory risk and/or positive sentiment from the Malaysian government about an operational change.

In the meantime, for those who similarly are not in the game of punting on mergers and acquisitions, I’d check out this buy-rated stock in a booming $22 billion industry.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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