The Wesfarmers Ltd (ASX: WES) share price has risen marginally today, closing 0.6% higher at $39.91.
This comes as Wesfarmers announced this afternoon that it has ‘implemented the scheme of arrangement’ under which the company has acquired all issued ordinary shares of Kidman Resources Ltd (ASX: KDR). A cash payment of $1.90 per share will be paid to all existing Kidman shareholders today and it’s expected that Kidman will be removed from ASX listing by end of trade tomorrow.
Wesfarmers’ Managing Director Rob Scott said the company was pleased to welcome Kidman team members joining the Wesfarmers Group today, stating “this acquisition and our planned future investment is an attractive opportunity to participate in the development of a large-scale, long-life and high-grade lithium hydroxide project in Western Australia in partnership with a global leader in the lithium industry… it leverages and builds on the existing strengths and chemical processing capabilities within our Chemicals, Energy and Fertilisers business, while supporting Western Australia’s ambition to become a global hub for downstream lithium processing”.
It has been an eventful year of disruption at Wesfarmers. After offloading 85% of its Coles Group Ltd (ASX: COL) ownership in November, the company attempted a takeover bid for rare-earth miner Lynas Corporation Ltd (ASX: LYC), which was ultimately unsuccessful.
Who is Kidman Resources?
Kidman Resources is a Melbourne-based lithium developer, who in conjunction with Chile’s SQM Group, owns a 50% interest in the Mt Holland lithium project based in Western Australia. This project is estimated to house “one of the world’s most significant lithium deposits”. At the stock’s height in May 2018, KDR shares were commanding a price north of $2.30, but before Wesfarmers announced its $1.90 per share acquisition, Kidman was trending around the $1.30 mark.
Lithium is a metal mostly used in the manufacturing of lithium-ion batteries – the most common form of rechargeable battery that is found in smartphones, laptops and other portable devices. Perhaps the most exciting application that investors see for lithium is the rise of electric vehicles made by Tesla Inc. and others. However, lithium stocks have seen a sump in recent years as an oversupply of the metal has led to depressed commodity prices – perhaps motivation for Wesfarmers’ acquisition.
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Sebastian Bowen owns shares of Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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.