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."
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.[NLINSERT]
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Disclosures from Canaccord Genuity, Kidman Resources, Flash Update, May 2, 2019
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