SPLASHING MONEY TO BUY INTO THE FUTURE

QUESTION: what do rare earths, lithium and an online retailer which also operates so-called “fulfilment centres” have in common?

Answer: they are all business areas that Wesfarmers – the “we are not, repeat not, a retailer but a conglomerate and we will damn well prove it to you” – has suddenly developed a passionate desire to own and operate.

In quick succession, seemly spaced five to six weeks apart, Wesfarmers has launched a $1.5 billion bid for rare earths producer Lynas Corporation, a $776 million bid for lithium hopeful Kidman Resources, and then yesterday it actually bought online retailer Catch Group for $230 million.

Hmm, I wonder what next will seize the acquisitive, conglomerate-re-establishing, mind of Wesfarmers CEO Rob Scott?

At least we probably know the size. In chronological order it’s been $1.5 billion, $776 million, $230 million: the next one has to cost around $30-60 million.

Catch, as Wesfarmers explained yesterday, is an “established and profitable” business that “operates online” offering “branded products on a first-party basis” and a “third-party online marketplace”.

This is supported by the two “fulfilment centres” – which I guess used to be called warehouses or more recently DCs or distribution centres.

Now it’s hard to identify an over-arching strategy in these moves, other than an attempt to buy into some part of the digital future.

Lithium is of course the irreplaceable component of batteries. For a while it was rare – because pre-smart low-level tomorrow’s Malaysia is going to allow Lynas to keep piling up more over there. I doubt that it would be a ‘cake-walk’ to start piling it up in WA.

Although here’s a thought: maybe the future Lynas waste could be stockpiled next to the also low-level nuclear medicine waste dump that is going to be built somewhere in the Outback. That’s, if we can still call it ‘the Outback’.

Unfortunately, in 10 years time that nuclear medicine waste dump will still be “going to be built”. And in 20 years time it will still be “going to be built’.

Whatever, Lynas’s waste issues are unlikely to be Wesfarmers to worry about unless acquisition-hungry CEO Scott is prepared to pay over $2 billion.

. The general surge in the share market and premature expectations of Lynas conjuring a waste solution has sent its share price close to $3 and well above the $2.25 that Wesfarmers signalled.

It’s much more likely to succeed with Kidman, but any revenue return from that is at least three or four years away and it’s going to have virtually double what it’s paid in its share of development costs.

Catch is clearly revenue positive and has obvious synergistic development options with the non-retailer group’s retail brands, especially Kmart and Target. Not so much I would suggest with the core retailing brand Bunnings.

That said, and with due apologies to Catch founders, Gabby and Hezi Leibovich, it hasn’t exactly set the online retail space alight.

It’s been around for 13 years – it even pre-dates the Apple iPhone – but at $230 million valuation, it’s no (true, software group) Atlassian, far less a downunder Amazon.