REG - Rio Tinto - Rio Tinto to acquire Arcadium Lithium

Rio TintoAnnouncement

09/10/2024 07:00

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RNS Number : 5083H  Rio Tinto PLC  09 October 2024

 

Notice to
ASX/LSE

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN ARE NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY
JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE
UNLAWFUL

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Rio Tinto to acquire Arcadium Lithium

9 October 2024

 

 

World-class lithium business to strengthen Rio Tinto's position as global
leader in

energy transition commodities

Counter-cyclical expansion into a high-growth market, aligned with Rio Tinto's
long-term strategy and disciplined capital allocation framework

Rio Tinto's scale, project development capabilities and financial strength to
unlock full potential of

Arcadium Lithium's Tier 1 resource base

Rio Tinto and Arcadium Lithium plc ("Arcadium Lithium" or "Arcadium") (NYSE:
ALTM) (ASX: LTM) today announced a definitive agreement (the "Transaction
Agreement") under which Rio Tinto will acquire Arcadium in an all-cash
transaction for US$5.85 per share (the "Transaction"). The Transaction
represents a premium of 90% to Arcadium's closing price of $3.08 per share on
4 October 2024, a premium of 39% to Arcadium's volume-weighted average price
(VWAP) since Arcadium was created on 4 January 2024, and values Arcadium's
diluted share capital at approximately $6.7 billion 1  (#_ftn1) .

The Transaction will bring Arcadium's world-class, complementary lithium
business into Rio Tinto's portfolio, establishing a global leader in energy
transition commodities - from aluminium and copper to high-grade iron ore and
lithium.

Arcadium is a global, fast-growing, vertically integrated lithium chemicals
producer with an asset base of long-life, low-cost operations and growth
projects. It has leading capabilities in lithium chemicals manufacturing and
extraction processes, including hard-rock mining, conventional brine
extraction and direct lithium extraction. Arcadium's current annual lithium
production capacity across a range of products including lithium hydroxide and
lithium carbonate is 75,000 tonnes lithium carbonate equivalent 2  (#_ftn2) ,
with expansion plans in place to more than double capacity by the end of
2028 3  (#_ftn3) . Arcadium's global operations, comprising approximately
2,400 employees, include facilities and projects in Argentina, Australia,
Canada, China, Japan, the United Kingdom and the United States.

Rio Tinto Chief Executive Officer Jakob Stausholm said: "Acquiring Arcadium
Lithium is a significant step forward in Rio Tinto's long-term strategy,
creating a world-class lithium business alongside our leading aluminium and
copper operations to supply materials needed for the energy transition.
Arcadium Lithium is an outstanding business today and we will bring our scale,
development capabilities and financial strength to realise the full potential
of its Tier 1 portfolio. This is a counter-cyclical expansion aligned with our
disciplined capital allocation framework, increasing our exposure to a
high-growth, attractive market at the right point in the cycle.

"We look forward to building on Arcadium Lithium's contributions to the
countries and communities where it operates, drawing on the strong presence we
already have in these regions. Our team has deep conviction in the long-term
value that combining our offerings will deliver to all stakeholders."

Arcadium Lithium CEO Paul Graves said: "We are confident that this is a
compelling cash offer that reflects a full and fair long-term value for our
business and de-risks our shareholders' exposure to the execution of our
development portfolio and market volatility. Arcadium Lithium is a leading
global lithium producer with the widest offering of lithium chemical products
and a world-class manufacturing network, backed by a broad technology
portfolio and expertise in all aspects of the lithium value chain. This
agreement with Rio Tinto demonstrates the value in what we have built over
many years at Arcadium Lithium and its predecessor companies, and we are
excited that this transaction will give us the opportunity to accelerate and
expand our strategy, for the benefit of our customers, our employees, and the
communities in which we operate."

Compelling Strategic and Financial Rationale

The transaction will bring Rio Tinto's scale, development capabilities and
financial strength to realise the full potential of the Arcadium portfolio.

·      Tier 1 assets. Arcadium is one of the world's leading global
lithium platforms, with diversified production and processing capabilities, a
broad range of high-performance lithium products, a highly attractive suite of
growth projects, and long-term blue-chip customer relationships. Its Tier 1
assets have maintained high margins through-the-cycle, and its resource base
is expected to support ~130% capacity growth by 2028 within Rio Tinto's
existing geographies(2). Rio Tinto's and Arcadium's combined assets will
represent the world's largest lithium resource base and make Rio Tinto one of
the leading lithium producers globally on a pro-forma basis.

 

·      Complementary capabilities. Rio Tinto has the balance sheet
strength and proven project delivery capability to execute and, over time,
accelerate the full potential from Arcadium's Tier 1 resource base. Rio Tinto
and Arcadium have complementary footprints and deep experience in Argentina
and Quebec, where Rio Tinto expects to establish world-class lithium hubs with
clear opportunities for sharing skillsets and reducing costs. Combining Rio
Tinto and Arcadium's technological leadership in lithium extraction, the
transaction will position Rio Tinto to become a market leader in lithium
processing. Rio Tinto looks forward to building on Arcadium's history of
commercial excellence that includes multi-year relationships with leading OEMs
and battery companies, by ensuring reliable, low-cost and sustainable supply.

 

·      Compelling economics. The transaction offers compelling value
driven by accelerating volume growth in a rising market contributing to
significantly higher EBITDA and free cash flow in the outer years, before
anticipated synergies. Acquiring Arcadium is consistent with Rio Tinto's
disciplined approach to capital allocation and will unlock significant value
for shareholders, underpinned by the financial strength that we will bring.
Rio Tinto will maintain its strong balance sheet following the close of this
transaction, in line with its Single A credit rating, as well as its long
track record of shareholder returns. Rio Tinto expects Arcadium's projected
growth capital expenditure to represent approximately 5% of Rio Tinto's group
capital expenditure of up to $10 billion across 2025 and 2026.

 

·      Right timing. Rio Tinto is confident in the long-term outlook for
lithium, with more than 10% compound annual growth rate in lithium demand
expected through to 2040 leading to a supply deficit 4  (#_ftn4) . With spot
lithium prices down more than 80% versus peak prices, this counter-cyclical
acquisition comes at a time with substantial long-term market and portfolio
upside, underpinned by an appealing market structure and established
jurisdictions.

 

Transaction Details

The Transaction has been unanimously approved by both the Rio Tinto and
Arcadium Lithium Boards of Directors. The Transaction, which will be
implemented by way of a Jersey scheme of arrangement, is expected to close in
mid-2025. Key conditions to closing of the Transaction include approval of
Arcadium Lithium shareholders and the Royal Court of Jersey. In addition, the
Transaction is subject to receipt of customary regulatory approvals and other
closing conditions.

Rio Tinto BM Subsidiary Limited, an indirect wholly owned subsidiary of Rio
Tinto plc, will acquire the Arcadium Lithium shares pursuant to the
Transaction Agreement.

Arcadium Lithium shareholders do not need to take any action at the present
time. A notice of meeting and proxy statement for the required meeting of
Arcadium Lithium shareholders, when available, will contain additional
information regarding the Transaction. A majority in number of those Arcadium
Lithium shareholders present and voting, and representing at least 75% of the
voting rights of all shares voted, will be required to complete the
Transaction.

Full details of the terms and conditions of the Transaction are set out in the
Transaction Agreement, which may be obtained, free of charge, on the SEC's
website (http://www.sec.gov) when available, and Rio Tinto's website at
https://www.riotinto.com/en/invest/exchange-releases
(https://www.riotinto.com/en/invest/exchange-releases) .

Conference Call

Rio Tinto and Arcadium Lithium management will discuss the Transaction during
a live webcast for investors and analysts at 9:30 AM BST on 9 October 2024.

 

Participants can access the live webcast at
https://edge.media-server.com/mmc/p/rzeiv2dj
(https://edge.media-server.com/mmc/p/rzeiv2dj)

or conference call at
https://register.vevent.com/register/BIc28a9d251f054b4fbd6c5685102bf8d6
(https://register.vevent.com/register/BIc28a9d251f054b4fbd6c5685102bf8d6)

 

Transaction Website

Additional information regarding the Transaction, including a Rio Tinto
investor presentation, can be found at www.RioTintoAndArcadium.com.

As a result of its pending combination, Arcadium Lithium will not hold an
earnings conference call in connection with its third quarter financial
results.

Advisors

Goldman Sachs and J.P. Morgan are acting as financial advisors to Rio Tinto
and Linklaters LLP is acting as lead legal advisor. Gordon Dyal & Co. is
serving as lead financial advisor and UBS Investment Bank as financial advisor
to Arcadium Lithium, and Davis Polk & Wardwell LLP is serving as legal
counsel.

About Arcadium Lithium

 

Arcadium Lithium is a leading global lithium chemicals producer committed to
safely and responsibly harnessing the power of lithium to improve people's
lives and accelerate the transition to a clean energy future. Arcadium
Lithium collaborates with their customers to drive innovation and power a more
sustainable world in which lithium enables exciting possibilities for
renewable energy, electric transportation and modern life. Arcadium Lithium is
vertically integrated, with industry-leading capabilities across lithium
extraction processes, including hard-rock mining, conventional brine
extraction and direct lithium extraction (DLE), and in lithium chemicals
manufacturing for high performance applications. They have operations around
the world, with facilities and projects in Argentina, Australia, Canada,
China, Japan, the United Kingdom and the United States. For more information,
please visit www.ArcadiumLithium.com (http://www.ArcadiumLithium.com) .

 

Important Notices

This announcement is for information purposes only and is not intended to and
does not constitute or form part of, an offer, invitation or the solicitation
of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities or the solicitation of any vote or approval in any
jurisdiction in contravention of applicable law. In connection with the
Transaction, Arcadium Lithium will file with the US Securities and Exchange
Commission (the "SEC") certain proxy materials, which shall constitute the
scheme document and the proxy statement relating to the proposed Transaction
(the "proxy statement").

The proxy statement will contain the full terms and conditions of the
Transaction, including details with respect to the Arcadium Lithium
shareholder vote in respect of the Transaction and will be sent or otherwise
disseminated to Arcadium Lithium's shareholders and will contain important
information about the proposed Transaction and related matters. Any decision
in respect of, or other response to, the Transaction should be made only on
the basis of the information contained in the proxy statement.

SHAREHOLDERS OF ARCADIUM LITHIUM ARE ADVISED TO READ THE PROXY STATEMENT AND
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION.

The proxy statement and other relevant documents may be obtained, free of
charge, on the SEC's website (http://www.sec.gov), when available. Arcadium
Lithium's shareholders may obtain free copies of the proxy statement once it
is available from Arcadium Lithium by going to Arcadium Lithium's website at
www.arcadiumlithium.com.

This announcement does not constitute a prospectus or prospectus exemption
document.

Goldman Sachs International ("Goldman Sachs"), which is authorised by the
Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority in the United Kingdom, is
acting exclusively for Rio Tinto and no one else in connection with the
Transaction and will not be responsible to anyone other than Rio Tinto for
providing the protections afforded to clients of Goldman Sachs, or for
providing advice in relation to the matters referred to herein. Neither
Goldman Sachs nor any of Goldman Sachs' subsidiaries, affiliates or branches
owes or accepts any duty, liability or responsibility whatsoever (whether
direct, indirect, consequential, whether in contract, in tort, under statute
or otherwise) to any person who is not a client of Goldman Sachs in connection
with this announcement, any statement contained herein or otherwise.

J.P. Morgan Securities plc which is authorised in the United Kingdom by the
Prudential Regulation Authority (the "PRA") and regulated by the PRA and the
Financial Conduct Authority and J.P. Morgan Securities LLC, which is a US
registered broker dealer and regulated by the Financial Industry Regulatory
Authority (J.P. Morgan Securities plc and J.P. Morgan Securities LLC together
"J.P. Morgan") are acting as financial adviser exclusively for Rio Tinto and
no one else in connection with the Transaction and will not regard any other
person as its client in relation to the Transaction and will not be
responsible to anyone other than Rio Tinto for providing the protections
afforded to clients of J.P. Morgan or its affiliates, nor for providing advice
in relation to the Transaction or any other matter or arrangement referred to
herein.

 

 

Participants in the Solicitation

Rio Tinto, Arcadium Lithium and certain of their respective directors and
officers may be deemed participants in the solicitation of proxies of Arcadium
Lithium's shareholders in connection with the proposed Transaction. Additional
information regarding the foregoing persons, including their direct and
indirect interests, by security holdings or otherwise, will be set forth in
the proxy statement and other relevant documents to be filed with the SEC.
Arcadium Lithium's shareholders and other interested persons may obtain,
without charge, more detailed information regarding the directors and officers
of Arcadium Lithium in Arcadium Lithium's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2023, which was filed with the SEC on April 29,
2024, and regarding the directors and officers of Rio Tinto in Rio Tinto's
Annual Report on Form 20-F, for the fiscal year ended December 31, 2023, which
was filed with the SEC on February 23, 2024.

General

The release, publication or distribution of this announcement in or into
certain jurisdictions may be restricted by the laws of those jurisdictions.
Accordingly, copies of this announcement and all other documents relating to
the Transaction are not being, and must not be, released, published, mailed or
otherwise forwarded, distributed or sent in, into or from any such
jurisdictions. Persons receiving such documents (including, without
limitation, nominees, trustees and custodians) should observe these
restrictions. Failure to do so may constitute a violation of the securities
laws of any such jurisdiction. To the fullest extent permitted by applicable
law, the companies and persons involved in the Transaction disclaim any
responsibility or liability for the violations of any such restrictions by any
person.

Forward Looking Statements

This announcement (including information incorporated by reference in this
announcement), oral statements made regarding the Transaction, and other
information published by Arcadium Lithium, Rio Tinto or any member of the Rio
Tinto Group contain statements which are, or may be deemed to be, "forward
looking statements" within the meaning of Section 27A of the Securities Act
and Section 21E of the US Securities Exchange Act of 1934. Such forward
looking statements are prospective in nature and are not based on historical
facts, but rather on current expectations and on numerous assumptions
regarding the business strategies and the environment in which Rio Tinto, any
member of the Rio Tinto Group or the enlarged group following the Transaction
("Enlarged Group") shall operate in the future and are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied by those statements. The forward looking statements
contained in this announcement relate to Rio Tinto, any member of the Rio
Tinto Group or the Enlarged Group's future prospects, developments and
business strategies, the expected timing and scope of the Transaction and
other statements other than historical facts. In some cases, these forward
looking statements can be identified by the use of forward looking
terminology, including the terms "believes", "estimates", "will look to",
"shall look to", "would look to", "plans", "prepares", "anticipates",
"expects", "is expected to", "is subject to", "budget", "scheduled",
"forecasts", "synergy", "strategy", "goal", "cost-saving", "projects"
"intends", "may", "will", "shall", or "should" or their negatives or other
variations or comparable terminology. Forward-looking statements may include
statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects; (ii)
business and management strategies and the expansion and growth of Rio
Tinto's, any member of the Rio Tinto Group or Arcadium Lithium's operations
and potential synergies resulting from the Transaction; and (iii) the effects
of global economic conditions and governmental regulation on Rio Tinto's, any
member of the Rio Tinto Group or Arcadium Lithium's business. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that shall occur in the future. These
events and circumstances include changes in the global, political, economic,
business, competitive, market and regulatory forces, future exchange and
interest rates, changes in tax rates and future business combinations or
disposals and other risks and uncertainties detailed in Rio Tinto's filings
with the SEC, including Rio Tinto's Annual Report on Form 20-F, for the fiscal
year ended December 31, 2023, which was filed with the SEC on February 23,
2024. If any one or more of these risks or uncertainties materialises or if
any one or more of the assumptions prove incorrect, actual results may differ
materially from those expected, estimated or projected. Such forward looking
statements should therefore be construed in the light of such factors. Neither
Arcadium Lithium or any of Rio Tinto or any member of the Rio Tinto Group, nor
any of their respective associates or directors, officers or advisers,
provides any representation, assurance or guarantee that the occurrence of the
events expressed or implied in any forward looking statements in this
announcement shall actually occur. Given these risks and uncertainties,
potential investors should not place any reliance on forward looking
statements.

Specifically, statements of estimated cost savings and synergies relate to
future actions and circumstances which, by their nature involve, risks,
uncertainties and contingencies. As a result, the cost savings and synergies
referred to may not be achieved, may be achieved later or sooner than
estimated, or those achieved could be materially different from those
estimated. Due to the scale of the Enlarged Group, there may be additional
changes to the Enlarged Group's operations. As a result, and given the fact
that the changes relate to the future, the resulting cost synergies may be
materially greater or less than those estimated.

The forward-looking statements speak only at the date of this announcement.
All subsequent oral or written forward-looking statements attributable to any
member of the Rio Tinto Group or Arcadium Lithium Group, or any of their
respective associates, directors, officers, employees or advisers, are
expressly qualified in their entirety by the cautionary statement above.

Arcadium Lithium, the Rio Tinto Group and Rio Tinto expressly disclaim any
obligation to update such statements other than as required by law or by the
rules of any competent regulatory authority, whether as a result of new
information, future events or otherwise.

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate
for any period and no statement in this announcement should be interpreted to
mean that earnings or earnings per share for Rio Tinto or Arcadium Lithium, as
appropriate, for the current or future financial years would necessarily match
or exceed the historical published earnings or earnings per share for Rio
Tinto or Arcadium Lithium, as appropriate.

LEI: 213800YOEO5OQ72G2R82

This announcement contains inside information.

This announcement is authorised for release to the market by Andy Hodges, Rio
Tinto's Group Company Secretary.

 

 

 

 

 

 

Contacts

Please direct all enquiries to media.enquiries@riotinto.com

 

 Media Relations,                   Media Relations,                       Media Relations,
 United Kingdom                     Australia                              Canada

 
 
 

 Matthew Klar                       Matt Chambers                          Vanessa Damha

 M +44 7796 630 637                 M +61 433 525 739                      M +1 514 715 2152

 David Outhwaite                    Michelle Lee                           Malika Cherry

 M +44 7787 597 493                 M +61 458 609 322                      M +1 418 592 7293

Media Relations,
                                    Rachel Pupazzoni                       US

 
                                    M +61 438 875 469

                                      Jesse Riseborough

                                      M +1 202 394 9480

 Investor Relations,                Investor Relations,
 United Kingdom                     Australia

 
 

 David Ovington                     Tom Gallop

 M +44 7920 010 978                 M +61 439 353 948

 Laura Brooks                       Amar Jambaa

 M +44 7826 942 797                 M +61 472 865 948

 Wei Wei Hu

 M +44 7825 907 230

 Arcadium Lithium contacts

 
 
 

 Investors                          Media                                  Teneo

 Daniel Rosen                       Karen Vizental                         Katherine Kim

 M +1 215 299 6208                  M+54 9 114 414 4702                    M +61 439 288 212

 daniel.rosen@arcadiumlithium.com   karen.vizental@arcadiumlithium.com     katherine.kim@teneo.com

                                      (https://shared.outlook.inky.com/link?domain=teneo.com&t=h.eJxtjksOwiAURbfSMFYIUIJ21K084bUQChhKHWjcuyXRxBhHd3Du70G2spChI67W68BYgOqw-IQ0-DhWTJipyZEcOhKaDYoB67d4XHx1u7IZc5mRVpcjrOMHv2mLMq5gArSGg51AcNOjkUopLewu8mIY1-Ik9bmXnGrRlrAtBSiY6M3fMVVY_jU3q_0-9cP8zvjzBZyfSjM.MEYCIQDxeO42nIEAPHk8NIKPdiG2unxstEMU707IJglWR5SHhgIhAI6LGpMnxM-zXcC3xYY7b6Ikus8Es1YiemDy15Vdfw9s)
 Phoebe Lee

 M +61 413 557 780

                                                                         Mark Stokes
 phoebe.lee@arcadiumlithium.com

                                                                         M +1 646 522 6268

                                                                         mark.stokes@teneo.com (mailto:mark.stokes@teneo.com)

 

 Rio Tinto plc           Rio Tinto Limited

 
 

 6 St James's Square     Level 43, 120 Collins Street

 London SW1Y 4AD         Melbourne 3000

 United Kingdom          Australia

 T +44 20 7781 2000      T +61 3 9283 3333

 Registered in England   Registered in Australia

 No. 719885              ABN 96 004 458 404

 

riotinto.com

 1  (#_ftnref1) Includes conversion of all outstanding convertible senior
notes due 2025.

 2  (#_ftnref2) Excludes the Mt Cattlin spodumene operation.

 3  (#_ftnref3) Source: Arcadium Lithium company disclosures.

 4  (#_ftnref4) Benchmark Mineral Intelligence (BMI) benchmark supply and
demand forecast as of September 2024.

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