Rio Tinto to Acquire Arcadium Lithium

Investing.com — Rio Tinto (LON:RIO) (ASX:RIO) announced on Wednesday that it plans to acquire Arcadium Lithium (NYSE:ALTM) for approximately $6.7 billion.

The all-cash deal is priced at $5.85 per share, which constitutes a 90% premium to Arcadium’s closing share price of $3.08 on October 4, 2024, and a 39% premium to the company's volume-weighted average price since its inception in January.

This acquisition will enhance Rio Tinto’s portfolio of energy transition commodities, which includes aluminium, copper, and high-grade iron ore. With Arcadium's lithium operations, Rio Tinto strengthens its position as a key supplier of materials necessary for renewable energy technologies and electric vehicle batteries.

Arcadium Lithium is a young but rapidly growing company with a solid foothold in the lithium chemicals market. It operates a vertically integrated lithium supply chain, encompassing hard-rock mining, brine extraction, and an innovative direct lithium extraction process.

Arcadium currently has an annual production capacity of 75,000 tonnes of lithium carbonate equivalent and aims to more than double this output by 2028. For Rio Tinto, this acquisition signifies an opportunity to leverage the soaring demand for lithium driven by the global transition to electric vehicles and clean energy.

Despite recent declines in spot lithium prices, long-term forecasts predict robust demand growth for lithium, with an estimated compound annual growth rate of over 10% through 2040.

CEO Jakob Stausholm described the acquisition as a significant step forward in the company’s long-term strategy. His counterpart at Arcadium, Paul Graves, affirmed that this deal reflects the value Arcadium has built and noted the advantage of reducing shareholder exposure to market volatility while fast-tracking the company’s ambitious growth.

The timing of this deal is notable; lithium prices, after skyrocketing to record highs, have dropped by over 80% from their peak. Rio Tinto’s counter-cyclical strategy positions it well for a sustained, long-term increase in lithium demand.

Furthermore, the acquisition promises operational synergies, particularly in Quebec and Argentina, where both companies have a presence. The deal has received unanimous approval from both boards and is expected to close by mid-2025, pending shareholder and regulatory approvals.

If successful, Rio Tinto will become one of the largest lithium producers globally, reinforcing its role in facilitating energy transition.

Advisors for this deal include Goldman Sachs and J.P. Morgan for Rio Tinto, while UBS and Gordon Dyal & Co. represent Arcadium Lithium.