Highlights

  • In 2019 Wesfarmers (ASX: WES) made a conditional, non-binding $2.25-per-share cash approach for Lynas worth about $1.5 billion; the Lynas board rejected it and the proposal lapsed. It was never a completed deal.
  • Wesfarmers instead built lithium exposure organically through Covalent Lithium, a 50/50 joint venture with SQM covering the Mt Holland mine and the Kwinana lithium hydroxide refinery.
  • First lithium hydroxide product at Kwinana was achieved in July 2025; the refinery was completed below cost estimates and is now ramping up.
  • In FY2025, Wesfarmers reported revenue of $45.7 billion and net profit after tax of $2,926 million, up 14.4 per cent, though WesCEF earnings fell and the lithium business recorded a loss.
  • Management has flagged 2026 as a transitional year for lithium, with retail divisions Bunnings and Kmart still carrying group earnings.

Wesfarmers (ASX:WES) is a diversified Australian conglomerate whose 2019 tilt at Lynas would have made it a rare earths player overnight. That bid failed, but the strategic logic behind it — securing critical minerals for the energy transition — has only grown stronger by 2026. Rather than acquiring rare earths, Wesfarmers pursued lithium through Covalent, and its Kwinana refinery is now producing. This piece links that history to the group's latest results and outlook. Nothing here is financial advice.

Some corporate deals matter more for not happening than for closing. Wesfarmers (ASX: WES)' approach to Lynas belongs in that category.

Back in March 2019, the Perth-based conglomerate stunned the market by lobbing an unsolicited bid for a rare earths miner. It was an unusual move for a company synonymous with hardware, discount retail and fertiliser.

The Lynas board said no, and by August 2019 Wesfarmers had walked away. The deal lapsed, and Lynas continued as an independent company.

Seven years on, the strategic questions that bid raised — about supply-chain security, critical minerals and where a retail-heavy conglomerate should deploy capital — are more pressing than ever. That is why, in 2026, the failed approach is worth revisiting.

The development

The core "development" is a historical one, and it must be read as history rather than as a live or completed transaction. In March 2019, Wesfarmers announced a conditional, non-binding proposal to acquire Lynas.

The terms were $2.25 per share in cash, valuing Lynas at roughly $1.5 billion and representing a premium of about 44.7 per cent to the pre-announcement price. It was structured as a scheme of arrangement, subject to due diligence and board agreement.

Crucially, the approach carried conditions. These included Lynas's Malaysian operating licences remaining valid for a satisfactory period after any completion — a live issue at the time, given the Malaysian government's requirement to relocate certain cracking and leaching operations.

The Lynas board rejected the proposal, describing its assets as strong and difficult to replace. Wesfarmers did not proceed, and Managing Director Rob Scott framed the outcome in terms of disciplined capital allocation and shareholder value. The proposal lapsed without a transaction — it delivered no rare earths assets to Wesfarmers, then or since.

Company background

Wesfarmers Limited is one of Australia's largest listed companies and a genuine conglomerate. Its portfolio spans retail, industrial and consumer-facing businesses under a single ASX listing.

The retail engine is Bunnings, the dominant home-improvement chain, alongside Kmart Group (Kmart and Target) and Officeworks. Together these account for the bulk of group earnings.

Beyond retail sits Wesfarmers Chemicals, Energy and Fertilisers (WesCEF), a long-standing industrial arm that produces ammonia, ammonium nitrate, fertilisers and industrial chemicals. WesCEF also houses the group's lithium ambitions.

The remaining pieces are Wesfarmers Health — built around Priceline, the API acquisition, Clear Skincare and Silk — and the Industrial and Safety division. Rob Scott has led the group as Managing Director through this period, including the pivot into lithium.

Latest financial and operational picture

Wesfarmers' most recent full-year result, for the year to 30 June 2025, showed the resilience of its retail base. Revenue reached $45.7 billion, up 3.4 per cent, while net profit after tax rose 14.4 per cent to $2,926 million.

Earnings per share came in at 258.0 cents and the full-year dividend was 206 cents, up 4.0 per cent. Operating cash flow was broadly steady at $4,568 million.

The divisional split underlined retail's dominance. Bunnings earnings were $2,336 million, Kmart Group $1,046 million and Officeworks $212 million. WesCEF earnings were $399 million, down 9.3 per cent, while Health earned $64 million and Industrial and Safety $104 million.

Within WesCEF, the lithium business recorded a loss of $59 million in FY2025, reflecting subdued pricing and higher unit costs during early ramp-up. First product at the Kwinana refinery was achieved in July 2025, a milestone after years of construction.

The half-year to 31 December 2025 continued the retail-led story. Revenue was $24,212 million, up 3.1 per cent, with net profit after tax of $1,603 million, up 9.3 per cent, and earnings before interest and tax of $2,493 million. The interim dividend rose 7.4 per cent to $1.02 per share.

On lithium, management noted the Kwinana refinery had been completed below cost estimates and was producing high-quality lithium hydroxide, with expectations that operations would contribute positively in the second half. The group also used its 2026 Strategy Briefing Day, held in June, to reaffirm its long-term priorities.

Why it matters to shareholders

For shareholders, the Lynas history is a window into how Wesfarmers thinks about capital. The company was willing to pay a large premium for rare earths in 2019, but only under conditions it could accept — and it walked when those conditions could not be met.

That discipline is the same lens shareholders can apply to the lithium venture today. Wesfarmers chose to build rather than buy, spreading spend over time through the Covalent joint venture with SQM.

The relevance in 2026 is strategic. Critical minerals — both lithium and rare earths — sit at the centre of electrification, defence and supply-chain policy, and Australian producers are increasingly viewed through that lens.

Wesfarmers now has direct, operating exposure to one part of that theme. The failed Lynas bid did not deliver rare earths, but it signalled an appetite that ultimately expressed itself in lithium refining.

Potential effect on revenue, earnings, margins and cash flow

In the near term, lithium is a modest earnings contributor at best and, more realistically, a drag during ramp-up. The FY2025 lithium loss and management's caution about 2026 make that clear.

Management has described 2026 as a transitional year, with production ramping over roughly 18 months and lithium losses potentially exceeding FY2025 levels. That tempers any expectation of a quick earnings uplift.

Group margins and cash flow remain anchored by retail. Bunnings and Kmart generate the free cash flow that funds dividends and reinvestment, so lithium's swings are cushioned at the group level.

Over a longer horizon, a refinery running at scale with better pricing could turn a loss-making unit into a contributor, but that outcome depends heavily on lithium prices, which remain volatile.

Bull case

The bull case rests on vertical integration and timing. Covalent combines the Mt Holland mine and concentrator with the Kwinana refinery, giving Wesfarmers control from ore to battery-grade hydroxide.

With a nameplate capacity of 50,000 tonnes a year, a fully ramped refinery could supply a meaningful volume of battery-grade product. If lithium prices recover as electrification demand grows, the economics improve materially.

The retail portfolio provides ballast throughout. Bunnings, Kmart and Officeworks continue to generate strong, cash-rich earnings, allowing Wesfarmers to be patient with lithium.

In this scenario, the group holds a genuine critical-minerals asset without having overpaid in a bidding war — a contrast with the aggressive 2019 approach.

Base case

The base case is more measured. Retail keeps driving group earnings, delivering steady revenue and dividend growth broadly in line with recent results.

Lithium remains a work in progress through 2026, with the refinery ramping and losses persisting before any sustained profitability. The business contributes strategically and, at times, to cash flow, but not yet decisively to profit.

WesCEF's traditional chemicals and fertiliser operations continue to cycle with commodity prices and seasonal demand.

Under this view, Wesfarmers is a resilient, retail-led conglomerate with an optional, long-dated lithium upside that is neither confirmed nor essential to the investment thesis.

Bear case

The bear case centres on lithium disappointment and cyclical retail pressure. If lithium prices stay depressed, the refinery's losses could persist longer than guided, weighing on WesCEF.

The paused expansion at Mt Holland is a reminder that even the joint venture partners have exercised caution amid cost and market uncertainty. Ramp-up risk in complex chemical processing is real.

On the retail side, a weaker Australian consumer would pressure the earnings that underpin the whole group.

In this scenario, lithium absorbs capital and management attention without delivering commensurate returns, and the diversified model looks less compelling.

Potential catalysts

  • Sustained, profitable ramp-up of the Kwinana lithium hydroxide refinery toward nameplate capacity.
  • A recovery in lithium hydroxide and spodumene prices supporting Covalent's economics.
  • Any decision to restart the paused Mt Holland mine expansion.
  • Continued earnings resilience from Bunnings and Kmart in full-year and half-year results.
  • Clearer group commentary on critical-minerals strategy at future results and strategy briefings.

Material risks

  • Lithium price volatility, which directly affects Covalent's profitability and WesCEF earnings.
  • Execution and ramp-up risk at the refinery, including cost and reliability challenges.
  • A softening Australian consumer pressuring retail earnings and cash flow.
  • Commodity and seasonal swings in WesCEF's chemicals and fertiliser operations.
  • Broader policy and geopolitical shifts affecting critical-minerals demand and supply chains.

What to watch next

  • The FY2026 full-year result (expected around late August 2026) for updated lithium losses and guidance.
  • Covalent production and quality milestones as battery-grade product qualifies with customers.
  • Any change in the status of the Mt Holland mine expansion.
  • Dividend trajectory and capital allocation signals from management.
  • Whether Wesfarmers broadens its critical-minerals commentary toward rare earths again.

Conclusion

The Wesfarmers (ASX: WES)–Lynas story is a study in what might have been. A retail conglomerate reached for rare earths at the dawn of the electrification era, was rebuffed, and let the bid lapse.

Yet the instinct behind that 2019 move did not disappear. It resurfaced as lithium, delivered through Covalent and the Kwinana refinery rather than a headline acquisition.

In 2026, with critical minerals firmly on the strategic agenda, Wesfarmers is a retail-led group with a real but still-maturing lithium business. The failed Lynas deal matters because it shows both the ambition and discipline that shape the company.

Investors should treat lithium as optionality on a resilient retail base, weighing the confirmed results against the uncertainties that remain.