Wesfarmers has secured a scheme implementation deed (SID) with Kidman Resources regarding a proposed takeover deal announced in early May.
The SID confirms the terms of Wesfarmers’ proposal to acquire 100 per cent of the outstanding shares in Kidman at $1.90 cash per share by way of a scheme of arrangement.
The price of $1.90 per share represents a premium of 47.3 per cent to Kidman’s last closing price on May 1, which was the day before Wesfarmers’ proposal to acquire Kidman — corresponding to a transaction value of approximately $776 million.
The Kidman board unanimously recommended that its shareholders back the scheme of arrangement once an independent expert concludes it is in their best interest.
Wesfarmers worked alongside the management teams of Kidman and Mt Holland lithium project joint venture company Covalent Lithium to complete due diligence on the arrangement.
Through this, Wesfarmers confirmed its view that the acquisition of Kidman provides the opportunity to invest in and develop a large-scale, long-life and high-grade lithium hydroxide project in Western Australia.
“This is an important milestone in advancing a transaction that provides Wesfarmers with an attractive investment and delivers Kidman shareholders with a compelling premium and certain cash return,” Wesfarmers managing director Rob Scott said.
As part of its due diligence process, Wesfarmers has developed its own plan in relation to the development of the Mt Holland lithium project.
Subject to final project design, movements in exchange rates and approval from Kidman’s joint venture Covalent Lithium, Wesfarmers estimated its share of capital expenditure for development plans at Mt Holland to be approximately $700 million.
A component of the increased capital expenditure results from investing in plant operating efficiency.
Wesfarmers also announced that it has entered into a commitment deed with global lithium giant Sociedad Quimica y Minera de Chile (SQM) in relation to the Mt Holland project joint venture agreement (JVA) with SQM and Kidman.
The deed sets out agreed amendments to the JVA that will become binding if Wesfarmers completes its acquisition of Kidman.
The board of Kidman alongside its advisors concluded that the SID is in the best interest of the company’s shareholders.
“We are pleased to recommend this attractive all-cash transaction with Wesfarmers to our shareholders,” Kidman chairman John Pizzey said.
“Kidman’s focus has been to create value for shareholders through the development of a leading Australian integrated lithium project and we have made significant progress towards achieving this goal.”
Wesfarmers is expecting that first production of lithium hydroxide from Mt Holland will occur in the second half of the 2022 calendar year.