Australian and British mining large Rio Tinto has agreed to accumulate US lithium maker Arcadium in an all-cash transaction for the New York Inventory Change (NYSE) and Australian Securities Change (ASX) listed agency at $5.85 per share.
The deal represents a premium of 90% to Arcadium’s closing value of $3.08 per share on October 4,, a premium of 39% to Arcadium’s volume-weighted common value (VWAP) since Arcadium was created on January 4, 2024, and values Arcadium’s diluted share capital at roughly $6.7 billion.
Arcadium was shaped by way of the all-stock merger of Allkem and Livent, after costs and demand got here underneath stress; collectively the 2 corporations had mixed revenues of $1.9 billion in 2022.
The deal will deliver Arcadium’s lithium enterprise into Rio Tinto’s portfolio, serving to to create a world chief in power transition commodities – from aluminium and copper to high-grade iron ore and lithium, based on a media launch.
Arcadium has capabilities in lithium chemical substances manufacturing and extraction processes, together with hard-rock mining, typical brine extraction and direct lithium extraction. Arcadium’s present annual lithium manufacturing capability throughout a variety of merchandise together with lithium hydroxide and lithium carbonate is the equal of 75,000 tonnes of lithium carbonate, with growth plans in place to greater than double capability by the tip of 2028.
Arcadium’s world operations, comprising roughly 2,400 workers, embrace amenities and initiatives in Argentina, Australia, Canada, China, Japan, the UK and the US.
Rio Tinto chief government officer Jakob Stausholm mentioned: “Buying Arcadium Lithium is a big step ahead in Rio Tinto’s long-term technique, making a world-class lithium enterprise alongside our main aluminium and copper operations to provide supplies wanted for the power transition.”
He added: “It is a counter-cyclical growth aligned with our disciplined capital allocation framework, rising our publicity to a high-growth, engaging market on the proper level within the cycle. We stay up for constructing on Arcadium Lithium’s contributions to the international locations and communities the place it operates, drawing on the robust presence we have already got in these areas. Our staff has deep conviction within the long-term worth that combining our choices will ship to all stakeholders.”
Arcadium Lithium CEO Paul Graves mentioned: “We’re assured that it is a compelling money supply that displays a full and honest long-term worth for our enterprise and de-risks our shareholders’ publicity to the execution of our improvement portfolio and market volatility.”
He added: This settlement with Rio Tinto demonstrates the worth in what we’ve constructed over a few years at Arcadium Lithium and its predecessor firms, and we’re excited that this transaction will give us the chance to speed up and increase our technique, for the good thing about our prospects, our workers, and the communities during which we function.”
Arcadium is without doubt one of the world’s main world lithium platforms, with diversified manufacturing and processing capabilities, a variety of lithium merchandise, progress initiatives, and long-term blue-chip buyer relationships. Its Tier 1 belongings have maintained excessive margins through-the-cycle, and its useful resource base is predicted to help round 130% capability progress by 2028 inside Rio Tinto’s present geographies, the discharge mentioned. Rio Tinto’s and Arcadium’s mixed belongings will characterize the world’s largest lithium useful resource base and make Rio Tinto one of many main lithium producers globally on a pro-forma foundation.
Rio Tinto and Arcadium have complementary footprints and expertise in Argentina and Quebec, the place “Rio Tinto expects to determine world-class lithium hubs” with clear alternatives for sharing skillsets and lowering prices, based on the media launch.
The intention of the deal is to mix Rio Tinto and Arcadium’s technological management in lithium extraction to turn out to be a market chief in lithium processing.
The corporate mentioned that the deal ought to contribute to considerably increased EBITDA and free money movement within the outer years, earlier than anticipated synergies.” Rio Tinto expects Arcadium’s projected progress capital expenditure to characterize roughly 5% of Rio Tinto’s group capital expenditure of as much as $10 billion throughout 2025 and 2026.
Rio Tinto mentioned it’s assured within the long-term outlook for lithium, with greater than 10% compound annual progress charge in lithium demand anticipated by way of to 2040 resulting in a provide deficit.
He firm mentioned that “with spot lithium costs down greater than 80% versus peak costs, this counter-cyclical acquisition comes at a time with substantial long-term market and portfolio upside, underpinned by an interesting market construction and established jurisdictions.”
The deal has been unanimously permitted by each the Rio Tinto and Arcadium Lithium boards of administrators. The deal which might be applied by the use of a Jersey scheme of association, is predicted to shut in mid-2025. Circumstances for the closing of the deal embrace approval of Arcadium Lithium shareholders and the Royal Court docket of Jersey. As well as, the deal is topic to receipt of customary regulatory approvals and different closing situations.
Goldman Sachs and JP Morgan are performing as monetary advisors to Rio Tinto and Linklaters is performing as lead authorized advisor. Gordon Dyal & Co. is serving as lead monetary advisor and UBS Funding Financial institution as monetary advisor to Arcadium Lithium, and Davis Polk & Wardwell LLP is serving as authorized counsel.
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