One of the world’s largest lithium producers has sparked a resurgence in dwindling lithium stocks after it lobbed an audacious $5.5 billion takeover bid at West Australia’s Liontown Resources, an offer the miner’s board has promptly rejected.
New York-listed chemicals giant Albemarle said on Tuesday it would pay $2.50 a share for Liontown, valuing the company at $5.5 billion, after building a 2.2 per cent stake in the WA mining minnow through its subsidiary RT Lithium.
Liontown called the timing of Albemarle’s bid “opportunistic”.Credit: Bloomberg
The fresh bid – Albemarle has taken two previous tilts at Liontown – sent shares in the miner soaring 50 per cent in early trade to $2.26 before ending the day at $2.57, as investors digested details of the proposed buyout via a scheme of arrangement.
“The Liontown board and its advisers carefully considered the indicative proposal and unanimously determined that it substantially undervalues Liontown, and therefore is not in the best interests of shareholders,” the company told the ASX in a statement.
Liontown called the timing of the all cash bid “opportunistic” given the “recent softness in companies exposed to the lithium sector”.
However, Albemarle said Liontown’s board had not “meaningfully engaged” with it over its proposal. “Albemarle believes this is a compelling opportunity for Liontown shareholders and that Liontown’s board should immediately engage with Albemarle to facilitate a binding offer to be put to its shareholders for their consideration,” the $US26 billion ($40 billion) lithium producer said.
The Australian miner maintains it has significantly de-risked its key Kathleen Valley lithium project, with mining operations commencing, construction progressing, and the project on track to deliver in mid-2024.
“Liontown continues to progress a number of attractive funding options for the remaining capital at the Kathleen Valley Lithium Project and expects to update the market on this front in the near term,” it said.
Citi analyst Kate McCutcheon said Liontown’s Kathleen mine could be accelerated more quickly by a company with a large balance sheet such as Albemarle. “We think a higher offer price will be needed to get LTR’s [Liontown] board back to the negotiating table,” McCutcheon said.
Lithium has shot to prominence over the past decade as a key ingredient for electric vehicle batteries.Credit: Shutterstock
Macquarie Bank analysts also think the miner is worth more, noting the indicative proposal was below their valuation. “Given the scale and expandability of Kathleen Valley, we believe a premium to valuation could be justified in a change of control transaction,” they said.
The scarcity of comparable lithium projects – there are few other assets of its scale, quality and mine life – and the possibility of early revenue from the direct shipping of ore, make it one of the most attractive lithium projects around, Liontown’s board said.
Australia is the world leader of lithium production, digging up an estimated 61,000 metric tons each year, followed by Chile and China.
Lithium has shot to prominence over the past decade as a key ingredient for electric vehicle batteries and both car manufacturers and producers are scrambling to carve out holdings of the valuable resource. Last year, Liontown nabbed Elon Musk’s Tesla as a foundation customer for its mine in a five-year deal that sent its share price soaring more than 15 per cent. Before that deal, it had signed up Korean battery manufacturer LG Energy Solution as its first customer.
Albemarle already owns some spodumene resources – a mineral from which lithium is derived – and conversion facilities at Greenbushes, Wodgina and Kemerton in Western Australia. The company said gaining control of Liontown would help it produce sustainable, high-quality battery-grade materials to underpin the clean energy transition.
Albemarle’s bid was subject to conditions before becoming binding, including Liontown providing exclusive due diligence, the board giving unanimous approval, and approval from Australia’s regulators. Its previous non-binding proposals were made on March 3 this year at $2.35 a share and on October 20 last year at $2.20 a share.
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