In a landmark transfer, Rio Tinto ( ASX:RIO,NYSE:RIO,LSE:RIO) has sealed an all-cash deal to amass US-based Arcadium Lithium (NYSE:ALTM,ASX:LTM) for US$6.7 billion. If profitable, the deal will catapult Rio Tinto to develop into the third-largest lithium producer worldwide.
Following rumors that each firms have been in talks for a doable acquisition, Rio Tinto introduced that it’s going all-in on the multi-billion sale. The deal, which is predicted to shut in mid-2025 pending approval by Arcadium’s shareholders, values Arcadium at US$5.85 per share, 90 % larger than its October 4 closing value of US$3.08.
Arcadium was established earlier this yr following a US$10.6 billion merger between lithium majors Allkem and Livent, forming a vertically built-in firm with international lithium operations spanning hard-rock mining, lithium brine extraction and chemical processing.
The corporate’s broad useful resource base, with property throughout Argentina, Australia, Canada and america, made the acquisition a extremely engaging prospect for Rio Tinto, as the acquisition now positions the corporate for strategic progress within the case of an anticipated value rebound.
Arcadium’s shares surged in value by greater than 40 % after the rumors began, triggering positive aspects in different lithium-focused shares. It moved even larger following affirmation of the acquisition, and the corporate closed at US$5.55 on October 9 — now up 80 % in comparison with its October 4 shut.
The deal has been unanimously accepted by the boards of each firms.
M&A ramping up within the lithium business
Rio Tinto’s transfer to amass Arcadium displays broader consolidation developments within the lithium business, as main gamers search to strengthen their market positions in anticipation of a ramping market geared in the direction of the long run.
Simply this August, Pilbara Minerals (ASX:PLS,OTC Pink:PILBF), an Australia-based lithium firm, introduced plans to amass Latin Sources (ASX:LRS,OTC Pink:LRSRF) in a deal valued at AU$560 million.
This acquisition would give Pilbara entry to Latin Sources’ flagship Salinas lithium challenge in Brazil, diversifying its portfolio past its Pilgangoora operation in Western Australia.
Moreover, Mineral Sources (ASX:MIN) continued its progress within the sector in late 2023 by buying the Bald Hill lithium mine, which noticed its first full manufacturing quarter in 2024.
MinRes is a part of a number of lithium three way partnership operations in Australia, together with the Wodgina lithium mine, which it owns alongside Albemarle (NYSE:ALB), the world’s largest lithium producer.
Mergers and acquisitions have been a recurring theme within the lithium sector this yr, as firms put together for a future the place demand for electrical automobiles, and consequently lithium, will skyrocket.
Consultants anticipate a number of extra offers to take form as firms search to strengthen their footholds in key areas.
Lithium costs anticipated to recuperate from non permanent droop
Total, the lithium market has skilled important volatility, with costs falling from their report highs seen in 2022. Analysts attribute this downturn to oversupply out there, in addition to macroeconomic elements resembling excessive rates of interest and slower-than-expected EV gross sales progress.
Nevertheless, most specialists consider the worth droop is non permanent, with demand for lithium set to rebound as EV adoption accelerates globally.
Rio Tinto’s curiosity in Arcadium follows continued downward value momentum for lithium this yr.
Trade analysts view the timing of the potential acquisition as strategic, permitting Rio to capitalize on the downturn whereas positioning itself for future progress as demand for lithium is predicted to rise considerably within the subsequent decade.
Lithium-ion batteries are integral to the EV business and demand is projected to extend as main automakers ramp up manufacturing of electrical automobiles.
If profitable, the acquisition would propel Rio Tinto into a number one place within the international lithium market, trailing solely Albemarle and SQM in manufacturing capability.
Analysts from Canaccord additionally estimate {that a} mixed Rio Tinto-Arcadium entity may provide round 10 % of the worldwide lithium chemical compounds market by 2030.
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Securities Disclosure: I, Giann Liguid, maintain no direct funding curiosity in any firm talked about on this article.
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