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 financial advisors Kroll.
Merging the two companies would create the world’s third-largest lithium producer by volume with assets spanning Australia, Canada, and Argentina. U.S.-based Albemarle Corp (ALB.N) and Chile’s SQM (SQMA.SN) are the top two producers. 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 Australia, 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 muscled in by amassing 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 emphasized 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 RushHourDaily. But for Arcadium, there would be no obvious reason to work with a partner given it already has the capital and skills it needs to develop projects. “Maybe for some people it does make sense to have an experienced Australian miner as a partner. That won’t be the case for Arcadium.”
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 utilization, 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.
