Albemarle asks for a week’s grace on Liontown takeover bid
Liontown Resources shares are meandering lower after the company said takeover suitor Albemarle has asked for another week to consider making a binding bid.
Liontown Resources shares have continued to weaken after takeover suitor Albemarle asked for another week of due diligence, a day after Hancock Prospecting revealed it had moved to a 19.9 per cent stake in the lithium miner.
US battery chemicals giant Albemarle was granted four weeks to do due diligence on Liontown after offering $3 per share for the company in a revised, non-binding bid.
Albemarle first approached Liontown with a $2.20 per share bid in October last year, which was revised upwards to $2.35, $2.50, and finally to a “best and final” $3.
The Liontown board agreed to open its books on receipt of the $3 offer, however that also precipitated a buying spree from billionaire Gina Rinehart’s Hancock Prospecting, which on Wednesday hit the 19.9 per cent threshold in Liontown beyond which a full takeover bid must be launched.
Following that, Liontown stock fell in early trade Thursday to trade as low as $2.80 - a level not seen since early September when the $3 offer was first made public.
The stock recovered to be 1.4 per cent lower in afternoon trade at $2.88.
Liontown and Albemarle have been silent on Hancock’s share purchases, with Liontown telling the ASX yesterday the US company had asked for more time to consider its next move.
“Liontown has been advised by Albemarle that, while Albemarle’s due diligence is substantially complete, it requires a short extension of the four-week exclusive due diligence period,’’ Liontown told the ASX.
“In response to this request, the Liontown board has determined to extend the exclusive due diligence period by seven days, on the same terms as previously announced.’’
The prevailing view among analysts is that Hancock is unlikely to launch a full takeover for Liontown, preferring instead to enter into a joint venture arrangement.
The 191.9 per cent Hancock stake gives the Australian mining firm the ability to almost certainly block any binding bid offered by Albemarle, which would need approval from 75 per cent of votes cast at a shareholder meeting.
Hancock has, in its statements about Liontown, said its shareholding is a “strategic stake’’, while also talking up its ability to bring Australian assets into production.
It has also cast doubts on Liontown’s ability to deliver on the cost projections at its flagship Kathleen Valley project which it is developing.
Liontown in late September revised upwards its operational and capital expenditure estimates for Kathleen Valley, but these modestly higher numbers did not convince Hancock.
“Whilst Hancock continues to see Liontown’s Kathleen Valley project as a significant lithium asset, Liontown’s update to the ASX ... reinforces Hancock’s previous observations that the project faces significant execution, operational ramp-up and market risks,’’ Hancock said late last month.
While the Liontown share price has weakened, the prevailing sentiment appears to be that Albemarle won’t walk away entirely, given that analyst price targets in the absence of the bid are in some cases less than half the $3 bid price.
Goldman Sachs’ 12 month risk-adjusted price target for Liontown is $1.35 per share while Citi has a risked discounted cashflow valuation of $1.54 in the absence of the bid.
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