Livent starts Australian campaign for $10.6 bln Arcadium Lithium merger

Allkem

12/11/2023 06:05

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      Deal would create third-biggest lithium producer
    

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      Arcadium aims to expand footprint in Western Australia 
    

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      CEO says no clear need to take Australian JV partner
    

  
    By Scott Murdoch and Melanie Burton
       SYDNEY, Nov 12 (Reuters) - U.S lithium major Livent
 LTHM.N  will begin meeting Allkem  AKE.AX  Australian investors
from Monday ahead of a vote next month to approve a $10.6
billion merger that would form the world's third-largest
producer amid weakening demand and prices for lithium. 
    Livent CEO Paul Graves will take the top job at the newly
minted Arcadium Lithium, if Allkem shareholders vote for the
deal on Dec. 19. The transaction has been recommended by
independent experts in a report compiled by Kroll.
    Merging the two companies would create the world's
third-largest lithium producer by volume with assets spanning
Australia, Canada and Argentina, after U.S.-based Albemarle
Corp (ALB.N) and Chile's SQM (SQMA.SN). 
    Graves has said that one of his first priorities would be
expanding Arcadium's footprint in Western Australia's
world-class lithium districts. 
    Buyout activity in the world's major lithium supplier has
been frenzied this year with at least two potential deals by
global chemicals firms thwarted as mining magnate-led companies
ammassed blocking stakes.
    Albemarle ditched its $4.3 billion deal for Liontown
Resources  LTR.AX  after Hancock Prospecting popped up on
Liontown's register with a near 20% shareholding, and emphasised
its ability to execute the project as a potential partner.
    "The starting point is, we know that there are world class
assets in Western Australia so if you want to be owning and
operating the best asset you have to be working over here,"
Graves told Reuters.
        Under the deal, Allkem shareholders will get one share
in the combined entity for each of their shares and the company
will ultimately own 56% of the new firm. 
    Livent shareholders will get 2.406 shares in the new firm,
which will be called Arcadium Lithium, for each existing share.
    The world's largest lithium producers, including Livent,
have said they remain bullish on long-term demand despite recent
price drops led by fears electric vehicle adoption is slowing.
    Livent Corp posted a lower-than-expected quarterly profit
two weeks ago and cut its annual revenue and earnings forecast,
blaming expansion delays in Argentina.
    The companies have estimated the deal would create pre-tax
operating cost synergies of approximately $125 million per annum
by 2027.
    "Allkem and Livent ... have operating and development assets
that are in relatively close proximity in Argentina and Canada,
creating opportunities for shared infrastructure, coordinated
operations, and more efficient logistics," the Kroll report
said.
    "Such proximity can lead to more efficient resource
utilisation, cost savings, and capital expenditure savings,
creating a particular set of synergies that are not as readily
achievable when assets are geographically dispersed."
    Livent was formed in 2018 when FMC Corp  FMC.N  spun off its
lithium division. Allkem was formed in 2021 by the combination
of Galaxy Resources and Orocobre.

 (Reporting by Scott Murdoch in Sydney and Melanie Burton in
Melbourne; editing by Robert Birsel)
 ((Scott.Murdoch@thomsonreuters.com;))