Kidman not aware of rival bids as shares exceed Wesfarmers' offerPeter KerResources reporterMay 9, 2019 — 2.09pmSaveShareKidman Resources chairman John Pizzey says he is not aware of any rival suitor for the company beyond Wesfarmers, and appears unlikely to push the Perth conglomerate for an improved offer despite Kidman shares trading above the offer price this week.Kidman shares traded as high as $1.98 on Wednesday, well above Wesfarmers’ $1.90-per-share offer to buy the lithium upstart.The share price surge sparked speculation of a new bid to rival Wesfarmers' $776 million offer, but Mr Pizzey poured cold water on that on Thursday.“We are not aware of anyone,” he said, when asked by shareholders about the prospect of a rival bid.“At the moment there is no [other] offer, there is no discussion with anyone going on, and if there is a true offer that is not littered with contingencies and get outs, we would consider it.”When asked by a shareholder whether he would seek an improved offer from Wesfarmers if Kidman shares continued to trade above the offer price, Mr Pizzey said the company was focused on completing the three weeks of due diligence on the acquisition.Advertisement“The market acts in weird and wonderful ways, that is all I can say. We have to get through due diligence at this stage, and confirm due diligence. I am sure in those discussions, that will be pointed out, but that is for discussion into the future,” he said. “What the market anticipates I don’t wish to comment on.”A Kidman spokesperson subsequently confirmed that the parties were committed to the $1.90 proposal price and do not intend to have any further price discussions at the end of the due diligence period.Kidman shares closed at $1.90 on Thursday.Risk-free offerMr Pizzey stressed Kidman was not soliciting rival bids under the terms of the preliminary agreement struck with Wesfarmers, which is expected to be formalised late this month.Kidman shares traded as high as $2.43 last May, and Mr Pizzey said shareholders should consider the risk-free nature of accepting Wesfarmers’ offer, compared to the execution risk that would exist if Kidman tried to develop the Mount Holland project with its Chilean partner, SQM.Mr Pizzey said Kidman shareholders were likely to see periods of depressed share price valuations in coming years if the Wesfarmers offer were rebuffed, and shareholders would need to decide whether they were willing to wait through those tough times for the eventual value creation when Mount Holland began production in about 2021.“The shareholders will need to go through the cycle of building a $2 billion project [if the Wesfarmers bid is rejected],” he said.Advertisement“We [would] have to raise the cash, probably equity and debt, we [would] have to probably do that on the strength of off-take agreements. The facilities have to be constructed and done on time at the right price.“If you hang on for that share price up there, I am sure you will have a share price down here somewhere through that cycle. That is what you have to decide: can I go the distance?“We think that $1.90 is the risk-free value of the project.”Mr Pizzey said Kidman managing director Martin Donohoe had done “one of the best deals in the world” when he sold half of the Mount Holland project to Chilean lithium giant SQM for $US110 million ($158 million) at a time when Kidman’s tenure over the project was in dispute.Those disputes were resolved in Kidman’s and SQM’s favour late last year.
KDR Price at posting:
$1.90 Sentiment: Buy Disclosure: Held
