Wesfarmers Makes Bid for Kidman Resources

May 7, 2019

The Energy Report

Source: Streetwise Reports   05/03/2019

The proposal was discussed in a Canaccord Genuity report.

In a May 2 research note, Canaccord Genuity analyst Eric Zaunscherb reported that Kidman Resources Ltd. (KDR:ASX), an Australian lithium developer, received an all cash acquisition bid of AU$1.90 per share from Wesfarmers, an Australian company with various operations, in industrials, home improvement, office supplies, apparel and more.

Zaunscherb noted the AU$1.90 per share proposal values Kidman at AU$776 million and amounts to a 44% premium to its 90-day volume-weighted average price. Although it is a “significant premium,” a better offer remains a possibility. That is because the proffered price “falls short of the heavily risked, fully financed net asset value per share estimate of $2.15 per share, thereby marginally undervaluing the company.”


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Wesfarmers’ bid for Kidman is another example of a potential industry trend underway, Zaunscherb said, consolidation among battery materials manufacturers. This is resulting from incongruence between the valuations of those companies and reality, in which the electric vehicle and grid storage markets, which require those materials, are growing.

Given the global lack of battery materials and potential further market consolidation against a backdrop of strong demand, now may be a good time for investors to look at the battery materials space, Zaunscherb noted.

Canaccord Genuity has a Speculative Buy rating and an AU$2.15 per share target price on Kidman, whose stock is currently trading at around AU$1.87 per share.

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Disclosures from Canaccord Genuity, Kidman Resources, Flash Update, May 2, 2019

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Banking activities, or to recommendations contained in the research.

 

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