THE BLUNDERING OF INNOCENTS FROM PERTH

THE direct discussions Wesfarmers had with the Malaysian government behind the back of its proposed target Lynas were not wrong. They were worse: they were just all-round dumb.

At the most basic level of corporate commonsense, if you are trying to get a “friendly agreed takeover” with another company, you don’t try to execute an endrun around that company.

Which is exactly what Wesfarmers was trying to do with the discussions, despite the protestations from its CEO, Rob Scott.

Indeed they “worked” brilliantly and beyond all presumed expectations – as in, the end-run succeeded, when the wily 94-year old Malaysian PM Mahathir Mohamad emerged from a Cabinet meeting to announce a deal (by implication, with Wesfarmers) to resolve Lynas’s 450,000 tonne radioactive waste problem.

Deal, what deal, Scott might respond? We were only “talking” about the issue. Which is precisely the point: he and Wesfarmers had blundered into a very complicated situation way, way above their pay grade.

As Dean Paatsche of governance Adviser Ownership Matters noted to the Nine press: “At the bottom line, this looks for me like a chapter of innocents abroad.”

And not just abroad in some generalised geographic sense, but at a place which is at the very crossroads of complicated and extremely serious geopolitical and geoeconomic currents.

These are rare earths – critical to 21st century technology, and of which Lynas has the only major production outside China.

And we are talking about the plant right next to the South China Sea which China is literally physically

LET me explain something rather basic to Scott & Co.

If you want to pursue the modern takeover-of-choice route – which is to say, a scheme of arrangement – you should understand that this is something which is proposed, can only be proposed, by the target company.

A conventional takeover is made by the bidder.

A scheme of arrangement is “made” by the target. Takeover tactics 101 – indeed, basic commonsense 101 – suggests you avoid getting the target pissed off.

Indeed, Wesfarmers

went much further than “pissing off” Lynas with its direct approach to the Malaysian government.

It’s potentially fundamentally undermined its negotiating position.

And indeed, potentially cruelled the very deal Wesfarmers is seeking.

Wesfarmers doesn’t just “protest too much”.

Yes, it was perfectly entitled to have the discussions – just as someone, for example, thinking of buying a block of land might talk to the council about the development options.

Except that this is first, very, very different; but at the same time, such a landbuyer could hardly protest if the landowner found out and got a tad pissed.