Empire strikes back

Wesfarmers serves it up to Malaysia talks critics

WESFARMERS has fired back at critics of its approach to the $1.5-billion play for rare earths producer Lynas, defending its engagement with the Malaysian government.

Wesfarmers has come under fire for meeting directly with the Malaysian government to discuss the regulatory impasse that has dogged Lynas in recent months.

The tensions with the Malaysian government threaten the ongoing viability of a $1billion processing plant Lynas operates in the Asian nation.

Wesfarmers yesterday said its discussions with the Malaysian government were “customary” for the type of transaction it has proposed.

The Perth-based retail and industrial conglomerate said it had held the talks to help it better understand the licensing and regulatory regime affecting its takeover target.

“Wesfarmers is disappointed with the mischaracterisation of its discussions with Malaysian government officials and rejects any inference that these were inappropriate or intended to interfere with government process,” it said.

Lynas has been in negotiations with the Malaysian government for months over the future of its rare earths processing plant there, in particular the mildly radioactive waste that comes out of the plant.

The miner had been pushing for an extension of its current licence, which expires in September, but some members of the Malaysian government had been pushing for a shutdown of the plant if Lynas did not remove all the current waste at the site.

The government also wants Lynas to carrying out the early stages of processing – which generate the contentious waste – outside Malaysia.

CLSA analyst Dylan Kelly accused Wesfarmers of “brazenly torpedoing” Lynas’s own negotiations with the government while Matthew Ryland from major Lynas shareholder Greencape Capital said Wesfarmers’ conduct “raised questions” about its corporate governance.

Wesfarmers said the engagement with the Malaysian government was “critical” to address the conditionality of its proposal.

“In all its discussions with the Malaysian government, Wesfarmers advised that it does not speak for Lynas, that its proposal remains subject to a number of conditions and that there is no certainty its proposal would result in a transaction,” it said.

Wesfarmers has offered to buy Lynas for $2.25 per share in a deal which values the rare earths producer at $1.5 billion.

It is the first acquisition tilt taken by Wesfarmers chief Rob Scott and follows the conglomerate spinning off supermarket chain Coles.