"I respectfully say that I have met the man and rate him highly as a leader. He is running WES for good reasons (i.e. his strategic capabilities); ..."@Bearman ,
Because truly competent company executives, who know how to create shareholder value (and, more importantly almost, know how to avoid destroying it) are exceedingly rare, my default position is always one of scepticism when it comes to the making of corporate acquisitions. (In my long-made observations, in the overwhelming majority of cases, acquisitions have resulted in the transfer of value from the shareholders of the acquiring company, to the shareholders of the company being acquired.)
As for him running Bunnings, someone very smart once said, "Invest in the kind of durable, high-quality businesses that will prosper even if they are run by a fool.... because, at one stage or another, they might well be". Bunnings, with its market leading position, the resonance of its brand, and its impenetrable commercial moat, is such a business, I firmly believe. I'm not very smart, but even I could manage Bunnings and the business would not falter, I reckon.
And talking about the depths and width of commercial moats that surround business models is a good segue into comparing the Bunnings commercial moat with that of this thing they are buying.
I find it very hard to identify any viable competitor coming into Bunnings' world and meaningfully impacting Bunnings' market dominance and pricing power; the barriers to entry to get to any position of remotely decent scale are insurmountable (as demonstrated by the failure of someone - Woolworths - that had hundreds of millions, indeed billions, of dollars to throw at the task).
For a wannabe lithium miner, even though this "energy storage" vision is a relatively young one (when measured in corporate evolutionary time frames), already there are numerous KDR look-a-likes, each with their own "robust project economics", no doubt.
I see significant competitive advantages in each the following line-up of businesses:
View attachment 1537879But with the following sort of supply-side industry structure, all I see is capital-intensive, finite life, single asset commodity businesses with almost zero pricing power:
View attachment 1537903Put another way, I think I can say, with a high degree of probability, what the hardware supply landscape in Australia will look like in 5, 10 or even 20 years' time.
But this lithium space, which barely existed just few short years ago: who can possibly know what that will look like in 5 or 10 years' time?
The more I look at it, the more this proposed acquisition looks to me mostly like a bit of a punt on a macro-thematic vision someone has.
But even if that grand vision proves to be valid, the outcome will never come remotely close to being a Bunnings in terms of value creation for Wesfarmer shareholders.
(20min delay)