LONDON – Mining big Rio Tinto (NYSE:) has reached a definitive settlement to buy Arcadium Lithium in an all-cash transaction valued at roughly $6.7 billion, or $5.85 per share. This acquisition worth represents a big premium of 90% over Arcadium’s closing share worth on October 4, 2024, and a 39% premium over the volume-weighted common worth since Arcadium’s inception on January 4, 2024.
The deal will combine Arcadium’s lithium enterprise into Rio Tinto’s portfolio, which incorporates aluminium, , high-grade iron ore, and now lithium, positioning the corporate as a worldwide chief in supplies crucial for the vitality transition. Arcadium Lithium is acknowledged for its diversified manufacturing and processing capabilities, providing a variety of lithium merchandise and possessing a sturdy suite of progress initiatives.
Rio Tinto CEO Jakob Stausholm expressed that buying Arcadium aligns with Rio Tinto’s long-term technique and can leverage the corporate’s growth capabilities and monetary energy to maximise the total potential of Arcadium’s Tier 1 useful resource base. Stausholm additionally emphasised the transaction’s strategic timing, aligning with market progress and the addition of high-quality belongings to Rio Tinto’s present operations.
Arcadium Lithium CEO Paul Graves acknowledged that the provide from Rio Tinto acknowledges the long-term worth of Arcadium’s enterprise and offers a possibility to speed up and broaden their technique, benefiting prospects, workers, and the communities they serve.
The acquisition is anticipated to shut in mid-2025, topic to approval by Arcadium shareholders, the Royal Courtroom of Jersey, and customary regulatory approvals. The transaction might be carried out through a Jersey scheme of association, with Rio Tinto BM Subsidiary Restricted, an oblique wholly owned subsidiary of Rio Tinto plc, buying the shares of Arcadium Lithium.
This strategic transfer is anticipated to double Arcadium’s present annual lithium manufacturing capability of 75,000 tonnes of lithium carbonate equal by the tip of 2028. Rio Tinto and Arcadium’s mixed belongings will kind the world’s largest lithium useful resource base, with Rio Tinto turning into one of many main lithium producers on a pro-forma foundation.
The data for this text relies on a press launch assertion.
In different latest information, Arcadium Lithium has seen vital consideration from analysts. CFRA downgraded its ranking from Purchase to Maintain because of the downturn in lithium costs, adjusting the value goal to $3.40. Regardless of this, Arcadium Lithium’s shares surged following information of potential acquisition talks with mining big Rio Tinto. In the meantime, Mizuho Securities elevated its worth goal to $4.30 whereas sustaining a impartial ranking, following reviews of the potential acquisition and a shareholder’s plea to reject lowball presents.
Arcadium Lithium additionally revealed plans to extend its quantity by almost 20% compound annual progress charge from 2024 to 2028 with out fairness dilution. This bold plan has drawn diversified responses from analysts. Evercore ISI maintained an Outperform ranking on the corporate, maintaining a gradual worth goal of $9.00, whereas BMO Capital Markets maintained a Market Carry out ranking, expressing warning concerning the firm’s bold plans. TD Cowen reaffirmed its Purchase ranking, applauding the corporate’s strategic plans and monetary efficiency.
UBS initiated protection on Arcadium Lithium with a Impartial ranking, reflecting a cautious strategy in the direction of the corporate’s near-term prospects attributable to market oversupply and decrease lithium costs. Piper Sandler maintained its underweight ranking on Arcadium Lithium, citing considerations over the worldwide lithium provide and demand steadiness. KeyBanc Capital Markets diminished the value goal to $8 whereas sustaining an Chubby ranking. These are latest developments regarding Arcadium Lithium.
InvestingPro Insights
To enrich the information of Rio Tinto’s acquisition of Arcadium Lithium, it is value analyzing some key monetary metrics and insights for Arcadium Lithium (ALTM) from InvestingPro.
In accordance with InvestingPro knowledge, Arcadium Lithium’s market capitalization stands at $4.54 billion, which is notably decrease than the $6.7 billion acquisition worth supplied by Rio Tinto. This substantial premium underscores Rio Tinto’s confidence in Arcadium’s long-term worth and progress potential within the lithium market.
InvestingPro Ideas spotlight that Arcadium Lithium has proven a big return over the past week, with a 47.22% worth complete return. This latest surge seemingly displays market response to the acquisition information. Moreover, the corporate has demonstrated robust returns over the past month and three months, with 87.61% and 29.66% worth complete returns, respectively.
It is necessary to notice that Arcadium Lithium operates with a reasonable degree of debt and its liquid belongings exceed short-term obligations, suggesting a steady monetary place. This monetary well being might have been a beautiful issue for Rio Tinto in its resolution to amass the corporate.
For buyers looking for extra complete evaluation, InvestingPro presents 11 further suggestions for Arcadium Lithium, offering a deeper understanding of the corporate’s monetary panorama and market place.
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