Street View: Livent-Allkem merger could spur lithium M&As; Allkem may get counter offers
11/05/2023 09:25
** Lithium companies Livent Corp LTHM.N and Allkem Ltd
AKE.AX said they will combine in an all-stock $10.6 bln deal
to create the world's third-largest producer of the metal used
to make EV batteries
** LTHM up 1.6% in thin premarket trade after jumping 5.2%
on Wed; AKE soared 15% during Australian trading hours
DEAL DILUTIVE TO AKE SHAREHOLDERS
** JP Morgan calculates a 7% premium for AKE shareholders,
which looks "light" against JPM's net present value for AKE and
is well below the upside seen in Allkem; says gains appear more
heavily skewed to LTHM shareholders
** "We believe the limited upside to AKE shareholders could
entice counter-bids from majors looking to boost their clean
energy metals exposure" - JPM
** Jefferies says this is unlikely to be the last deal M&A
among lithium stocks
** "With the commodity price bouncing from lows and strong
strategic rationale, we see the deal providing positive momentum
for AKE stock and the sector," Jefferies says
** Canaccord Genuity questions the timing of deal given the
market currently undervalues AKE's longer-term growth
optionality; views the deal as a possible defensive move against
the risk of an opportunistic bid from a larger group
** Our read is this was not a hurry-up deal but long
discussed and contemplated. Closing conditions do no seem
onerous but multiple jurisdictions and market regulators account
for the timing - Evercore
** The companies expect to close the deal by CY 2023
** RBC sees upside potential to synergy estimates over the
long term; flags AKE's Argentinian brine operation as having the
most significant upside given its large resource base
** TD Cowen sees "compelling" rationale in listing merged co
in U.S. given AKE's discounted valuation, cost synergies, likely
more capital efficient profile in Canada/Argentina, and a more
de-risked funding profile
(Reporting by Susan Mathew)
((susan.mathew@thomsonreuters.com;))