A halfway split would be one way of describing the takeover price Rio Tinto (ASX:RIO) will pay to take control of Arcadium (ASX:LTM).
It will cost Rio US$6.7 billion (A$9.9 billion), which is more than the US$4 billion or so the company was trading it before news broke last week of Rio’s interest, but not as much as some vocal Arcadium investors wanted at around US$8 billion or more.
But it is a rich offer – US$2.2 billion more than the value of Arcadium at the 4pm close on the ASX on Wednesday of US$4.5 billion.
Rio is offering US$5.85 a share, or A$8.67, well above the A$5.91 the company closed at on Wednesday – down 0.51%.
That’s a 90% premium to the US$3 a share Arcadium shares were trading at on October 4, the day before Rio’s interest emerged.
Oddly, the bid came after a trading session that saw many lithium stocks sold off on the ASX. Pilbara Minerals (ASX:PLS) fell 5%, IGO (ASX:IGO), more than 2%, Liontown (ASX:LTR) was off over 5% as well. And Mineral Resources (ASX:MIN) saw its shares down 6.4%.
Perhaps that was due to a feeling that Rio and Arcadium would be soon announcing a deal?
Rio said in the statement that the deal will bring Arcadium’s world-class, complementary lithium business mix into Rio Tinto’s portfolio, establishing a global leader in energy transition commodities – from aluminium and copper to high-grade iron ore and lithium.
Arcadium’s current annual lithium production capacity across a range of products including lithium hydroxide and lithium carbonate is at around 75,000 tonnes lithium carbonate equivalent, with expansion plans in place to more than double capacity by the end of 2028.
Arcadium employs around 2,400 employees, has facilities and projects in Argentina, Australia, Canada, China, Japan, the UK and the US.
The company has announced plans to close its Mount Cattlin mine in WA, which would effectively end its presence here. The company has already paused its Galaxy project in Quebec and delayed part of an expansion at Fénix in Argentina.
Rio Tinto CEO Jakob Stausholm said in Wednesday's statement that “Acquiring Arcadium Lithium is a significant step forward in Rio Tinto’s long-term strategy, creating a world-class lithium business alongside our leading aluminium and copper operations to supply materials needed for the energy transition.”
"Arcadium Lithium is an outstanding business today and we will bring our scale, development capabilities and financial strength to realise the full potential of its Tier 1 portfolio.
"This is a counter-cyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle.
“We look forward to building on Arcadium Lithium’s contributions to the countries and communities where it operates, drawing on the strong presence we already have in these regions. Our team has deep conviction in the long-term value that combining our offerings will deliver to all stakeholders.”
Arcadium Lithium CEO Paul Graves said in the same statement that “We are confident that this is a compelling cash offer that reflects a full and fair long-term value for our business and de-risks our shareholders’ exposure to the execution of our development portfolio and market volatility.
"This agreement with Rio Tinto demonstrates the value in what we have built over many years at Arcadium Lithium and its predecessor companies, and we are excited that this transaction will give us the opportunity to accelerate and expand our strategy, for the benefit of our customers, our employees, and the communities in which we operate.”
