Battery minerals popular target for M&A deals

The energy and resources sector accounted for 30 per cent of public merger and acquisition (M&A) deals in the 2019 financial year.

Herbert Smith Freehills’ 11th annual Australian Public M&A Report revealed a significant increase in the appetite of private equity investors.

Of the 63 announced deals in the financial year, 19 were within the energy and resources sector.

Wesfarmers’ $769 million acquisition of Kidman Resources rounded out the top 10 for the largest deals of the year. The agreement gave Wesfarmers a 50 per cent interest in the Mt Holland lithium project in Western Australia.

The highest value targets in the energy and resources sector were battery minerals, such as lithium and cobalt, which made up 37 per cent of all energy and resource deals.

Oil and gas accounted for 23 per cent of deals, closely behind was gold with 19 per cent, other unspecified energy and resource deals made up 13 per cent, 6 per cent of deals were for copper and iron ore made up 2 per cent of deals.

More than one in five deals involved a private equity bidder, four of which were unsolicited. Of these four, the only successful unsolicited private equity deal was China’s Phoenix Bridge Group’s cash bid for Anchor Resources.

An independent expert found the offer for the Australian company to be fair and reasonable, with Phoenix offering a 54 per cent premium to Anchor’s shareholders.

Stanmore Coal was also a target of an unsolicited takeover by Golden Investments but despite waiving its 50 per cent minimum acceptance condition, the bidders were unsuccessful, holding on 25.57 per cent of the target at the end of the bid.

Herbert Smith Freehills partner and M&A report co-author Paul Branston attributed the increased interest in private equity of Australian assets to the country’s current economic climate.

“Our low interest rates, the low Australian dollar and lower levels of political unrest compared to private equity’s typical regions of interest such as the US and Europe make Australia an increasingly attractive destination for private equity investment,” Branston said.

“Given these conditions, we can expect private equity to continue to play a significant role in Australian public M&A markets this year.”

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