LONDON - Mining giant Rio Tinto (NYSE:RIO) has reached a definitive agreement to purchase Arcadium Lithium in an all-cash transaction valued at approximately $6.7 billion, or $5.85 per share. This acquisition price represents a significant premium of 90% over Arcadium’s closing share price on October 4, 2024, and a 39% premium over the volume-weighted average price since Arcadium's inception on January 4, 2024.
The deal will integrate Arcadium’s lithium business into Rio Tinto’s portfolio, which includes aluminium, copper, high-grade iron ore, and now lithium, positioning the company as a global leader in materials critical for the energy transition. Arcadium Lithium is recognized for its diversified production and processing capabilities, offering a range of lithium products and possessing a robust suite of growth projects.
Rio Tinto CEO Jakob Stausholm expressed that acquiring Arcadium aligns with Rio Tinto's long-term strategy and will leverage the company's development capabilities and financial strength to maximize the full potential of Arcadium's Tier 1 resource base. Stausholm also emphasized the transaction's strategic timing, aligning with market growth and the addition of high-quality assets to Rio Tinto's existing operations.
Arcadium Lithium CEO Paul Graves stated that the offer from Rio Tinto acknowledges the long-term value of Arcadium's business and provides an opportunity to accelerate and expand their strategy, benefiting customers, employees, and the communities they serve.
The acquisition is expected to close in mid-2025, subject to approval by Arcadium shareholders, the Royal Court of Jersey, and customary regulatory approvals. The transaction will be carried out via a Jersey scheme of arrangement, with Rio Tinto BM Subsidiary Limited, an indirect wholly owned subsidiary of Rio Tinto plc, acquiring the shares of Arcadium Lithium.
This strategic move is anticipated to double Arcadium's current annual lithium production capacity of 75,000 tonnes of lithium carbonate equivalent by the end of 2028. Rio Tinto and Arcadium's combined assets will form the world's largest lithium resource base, with Rio Tinto becoming one of the leading lithium producers on a pro-forma basis.
The information for this article is based on a press release statement.
In other recent news, Arcadium Lithium has seen significant attention from analysts. CFRA downgraded its rating from Buy to Hold due to the downturn in lithium prices, adjusting the price target to $3.40. Despite this, Arcadium Lithium's shares surged following news of potential acquisition talks with mining giant Rio Tinto. Meanwhile, Mizuho Securities increased its price target to $4.30 while maintaining a neutral rating, following reports of the potential acquisition and a shareholder's plea to reject lowball offers.
Arcadium Lithium also revealed plans to increase its volume by nearly 20% compound annual growth rate from 2024 to 2028 without equity dilution. This ambitious plan has drawn varied responses from analysts. Evercore ISI maintained an Outperform rating on the company, keeping a steady price target of $9.00, while BMO Capital Markets maintained a Market Perform rating, expressing caution about the company's ambitious plans. TD Cowen reaffirmed its Buy rating, applauding the company's strategic plans and financial performance.
UBS initiated coverage on Arcadium Lithium with a Neutral rating, reflecting a cautious approach towards the company's near-term prospects due to market oversupply and lower lithium prices. Piper Sandler maintained its underweight rating on Arcadium Lithium, citing concerns over the global lithium supply and demand balance. KeyBanc Capital Markets reduced the price target to $8 while maintaining an Overweight rating. These are recent developments concerning Arcadium Lithium.
InvestingPro Insights
To complement the news of Rio Tinto's acquisition of Arcadium Lithium, it's worth examining some key financial metrics and insights for Arcadium Lithium (ALTM) from InvestingPro.
According to InvestingPro data, Arcadium Lithium's market capitalization stands at $4.54 billion, which is notably lower than the $6.7 billion acquisition price offered by Rio Tinto. This substantial premium underscores Rio Tinto's confidence in Arcadium's long-term value and growth potential in the lithium market.
InvestingPro Tips highlight that Arcadium Lithium has shown a significant return over the last week, with a 47.22% price total return. This recent surge likely reflects market reaction to the acquisition news. Additionally, the company has demonstrated strong returns over the last month and three months, with 87.61% and 29.66% price total returns, respectively.
It's important to note that Arcadium Lithium operates with a moderate level of debt and its liquid assets exceed short-term obligations, suggesting a stable financial position. This financial health could have been an attractive factor for Rio Tinto in its decision to acquire the company.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Arcadium Lithium, providing a deeper understanding of the company's financial landscape and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.