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Wednesday, December 6, 2023

Lithium Producers Livent and Allkem Ink US$10.6 Billion Mega Merger Deal

Top lithium producers Livent (NYSE:LTHM) and Allkem (ASX:AKE,OTC Pink:OROCF) have signed a US$10.6 billion mega merger deal, the two companies said on Wednesday (May 10).

The all-stock merger of equals transaction is expected to close at the end of 2023, with the combined company to list in both the US and Australia. Allkem shareholders will own approximately 56 percent of the newly formed company, NewCo, while Livent shareholders will own the remaining stake.

Demand for lithium is expected to surge in the coming years as electric vehicle sales and the deployment of energy storage systems increase. NewCo, to be headquartered in North America, has a forecast lithium carbonate equivalent production capacity of 248,000 tonnes per year.

“Together we can accelerate our growth plans and deliver more lithium, more reliably, and more quickly, than either of us can do alone,” said Livent CEO Paul Graves, who will remain in the top executive role in the new company.

Livent, which was spun off from FMC (NYSE:FMC) in 2018, has been operating its lithium business in the Salar del Hombre Muerto in Argentina for more than 20 years. In Canada, Livent owns 50 percent of Nemaska Lithium, a fully integrated lithium hydroxide development project located in Quebec.

During the first three months of the year, Livent reported record revenue and profitability on the back of higher pricing and strong lithium demand. The Philadelphia-based company has lithium supply deals in place with carmakers Tesla (NASDAQ:TSLA), GM (NYSE:GM) and BMW (ETR:BMW).

Meanwhile, Allkem was formed two years ago after the AU$4 billion merger of Argentina-focused Orocobre and Australia’s Galaxy Resources. The industrial chemicals and minerals company operates in the Salar de Olaroz in Argentina. In the March quarter, Allkem generated record revenue of US$159 million at Olaroz, with a gross cash margin of 91 percent.

The company has also been advancing plans to develop the Sal de Vida lithium brine and potash project in the South American country. It also owns the Mount Cattlin mine in Western Australia, which is currently producing spodumene and tantalum concentrate, as well as the James Bay lithium pegmatite project in Canada.

Merger and acquisition activity has been picking up pace in the lithium sector this year. Earlier in 2023, top lithium producer Albemarle (NYSE:ALB) made a US$3.7 billion takeover offer for Australia’s Liontown Resources (ASX:LTR,OTC Pink:LINRF), which was rejected. Another Australian company, Essential Metals (ASX:ESS,OTC Pink:PIONF), declined a bid from the joint venture formed by leading producers Tianqi Lithium (OTC Pink:TQLCF,SZSE:002466) and IGO (ASX:IGO,OTC Pink:IPGDF).

When markets opened in the US on Wednesday, shares of Livent were trading at US$25.18, up 32.93 percent so far this year. Meanwhile, Allkem’s share price is up 16.94 year-to-date, and was trading at AU$12.91 when markets closed in Australia.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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