Rio Tinto to buy Arcadium Lithium in $6.7 billion deal By Investing.com

Investing.com — Rio Tinto (LON:) (ASX:) in a stock market filing on Wednesday said it plans to buy Arcadiu Litiu (NYSE: ) in a transaction valued at approximately $6.7 billion.

The all-cash transaction, priced at $5.85 per share, represents a 90% premium to Arcadium’s closing stock price of $3.08 on October 4, 2024, and a 39% premium to the weighted average price in function of the company’s volume since its establishment in January this year. .

This transaction will enhance Rio Tinto’s portfolio of commodities for the energy transition, which already includes aluminum and high-grade iron ore.

With Arcadium’s lithium business, Rio Tinto will further strengthen itself as a leading player in the supply of critical materials for renewable energy technologies and electric vehicle batteries.

Arcadium Lithium, a relatively young but rapidly growing company, has built a strong presence in the lithium chemicals market.

The company operates a vertically integrated lithium supply chain with resources in hard rock mining, brine mining and the innovative direct lithium extraction process.

Arcadium currently has an annual production capacity of 75,000 tonnes of lithium carbonate equivalent and plans to double this production by 2028.

For Rio Tinto, the deal is an opportunity to capitalize on booming lithium demand driven by the global shift to electric vehicles and clean energy.

Despite recent declines in lithium spot prices, long-term forecasts show strong growth in demand for the metal, with estimates suggesting a compound annual growth rate of more than 10% through 2040.

Rio Tinto CEO Jakob Stausholm described the deal as a “significant step forward” in the company’s long-term strategy.

Paul Graves, CEO of Arcadium Lithium, echoed those sentiments, noting that the deal reflects the value Arcadium has accumulated over the years.

He also cited the benefits of reducing shareholders’ exposure to market volatility while accelerating the company’s ambitious growth plans.

The deal comes at an interesting time for the lithium market. After soaring to record highs in recent years, lithium prices have cooled, falling more than 80% from their peak.

This countercyclical move by Rio Tinto positions the company to take advantage of what is expected to be sustained, long-term growth in lithium demand.

With the acquisition, Rio Tinto also expects synergies in its existing operations, particularly in regions such as Quebec and Argentina, where both companies have a presence.

The deal, which was unanimously approved by both companies’ boards of directors, is expected to close by mid-2025, pending shareholder and regulatory approval.

If successful, it will make Rio Tinto one of the largest lithium producers globally, further cementing its role in the energy transition.

Advisers on the deal include Goldman Sachs and JP Morgan on behalf of Rio Tinto, with Arcadium being advised by UBS and Gordon Dyal & Co.