Rio Tinto to purchase Arcadium Lithium in $6.7bn deal

Australian and British mining big Rio Tinto has agreed to amass 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 worth of $3.08 per share on October 4,, a premium of 39% to Arcadium’s volume-weighted common worth (VWAP) since Arcadium was created on January 4, 2024, and values Arcadium’s diluted share capital at roughly $6.7 billion.

Arcadium was fashioned by way of the all-stock merger of Allkem and Livent, after costs and demand got here below stress; collectively the 2 corporations had mixed revenues of $1.9 billion in 2022. 

The deal will carry 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, in keeping with a media launch. 

Arcadium has capabilities in lithium chemical compounds manufacturing and extraction processes, together with hard-rock mining, standard brine extraction and direct lithium extraction. Arcadium’s present annual lithium manufacturing capability throughout a spread of merchandise together with lithium hydroxide and lithium carbonate is the equal of 75,000 tonnes of lithium carbonate, with enlargement plans in place to greater than double capability by the top of 2028.

Arcadium’s world operations, comprising roughly 2,400 staff, embody services and tasks 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: “This can be a counter-cyclical enlargement aligned with our disciplined capital allocation framework, growing our publicity to a high-growth, engaging market on the proper level within the cycle. We look ahead to 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 group 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 this can be a compelling money provide that displays a full and truthful 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 have now 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 advantage of our prospects, our staff, 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 spread of lithium merchandise, development tasks, and long-term blue-chip buyer relationships. Its Tier 1 belongings have maintained excessive margins through-the-cycle, and its useful resource base is anticipated to assist round 130% capability development by 2028 inside Rio Tinto’s present geographies, the discharge mentioned. Rio Tinto’s and Arcadium’s mixed belongings will signify 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 ascertain world-class lithium hubs” with clear alternatives for sharing skillsets and decreasing prices, in keeping with the media launch. 

The intention of the deal is to mix Rio Tinto and Arcadium’s technological management in lithium extraction to change into a market chief in lithium processing. 

The corporate mentioned that the deal ought to contribute to considerably greater EBITDA and free money movement within the outer years, earlier than anticipated synergies.” Rio Tinto expects Arcadium’s projected development capital expenditure to signify roughly 5% of Rio Tinto’s group capital expenditure of as much as $10 billion throughout 2025 and 2026.

Rio Tinto mentioned IT is assured within the long-term outlook for lithium, with greater than 10% compound annual development price 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 will likely be carried out by the use of a Jersey scheme of association, is anticipated to shut in mid-2025. Circumstances for the closing of the deal embody approval of Arcadium Lithium shareholders and the Royal Courtroom 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 appearing as monetary advisors to Rio Tinto and Linklaters is appearing 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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