The Lynas Corporation Ltd (ASX: LYC) share price and the Wesfarmers Ltd (ASX: WES) share price are both trading lower on Tuesday after the latter released an update on its takeover approach.
At the time of writing the Lynas share price is down 0.25% to $2.11 and the Wesfarmers share price has dropped almost 1% to $34.13.
What was announced?
Last month Wesfarmers announced a conditional, non-binding indicative proposal to acquire Lynas for $2.25 cash per share.
One of the conditions was that its relevant operating licences in Malaysia are in force and will remain in force for a satisfactory period following completion of the transaction.
On Friday the Prime Minister of Malaysia commented at a press conference that Lynas may continue to operate if raw materials are brought into the country after initial processing elsewhere.
Yesterday Lynas acknowledged that it is well progressed with the planning of various options to geographically diversify processing, which would address this licence condition.
This morning Wesfarmers advised that it sees these developments "as positive progress towards satisfactory licence certainty" and awaits the communication of detailed licence conditions in due course by the Malaysian Government.
As a result, managing director Rob Scott advised that: "With greater clarity around licence renewal and Lynas' plans to address these licence conditions, Wesfarmers remains open to engage with the Lynas Board on our Proposal, with a view to progressing a less conditional proposal. Wesfarmers is a disciplined, principled investor with opportunities to invest across a range of sectors, in addition to our core businesses."
The company also hit back at suggestions it had interfered with Government processes.
The release states: "Wesfarmers is disappointed at the mischaracterisation of its discussions with Malaysian Government officials and rejects any inference that these were inappropriate or intended to interfere with Government process."
Before clarifying that it engaged in discussions with the Malaysian Government to better understand the licensing and regulatory regime affecting Lynas' operations and to present its credentials as a potential acquirer of Lynas. Which "is critical for Wesfarmers to address the conditionality of its Proposal."
Should you invest?
If Wesfarmers is able to snap up Lynas for $2.25 per share then I think it could add a lot of value for shareholders. But as there's no certainty that a deal will be made at this price or any other, investors may want to hold off an investment and wait to see how things develop in the coming weeks.
