Livent and Allkem Set to Merge, Creating World’s Third-Largest Lithium Producer

The merger has received a positive recommendation from independent experts, as detailed in a report compiled by financial advisors Kroll.

U.S. lithium giant Livent (LTHM.N) is set to engage with Australian investors of Allkem (AKE.AX) starting next week, laying the groundwork for a crucial vote in December to approve a monumental $10.6 billion merger.

This merger aims to create the world’s third-largest lithium producer, a strategic move driven by the softening demand and prices for lithium in the market.

The proposed merger will result in the formation of Arcadium Lithium, with Livent CEO Paul Graves poised to assume the top leadership position if Allkem shareholders give their nod on December 19.

The merger has received a positive recommendation from independent experts, as detailed in a report compiled by financial advisors Kroll.

This amalgamation would catapult the new entity to the third position globally in lithium production by volume, with assets spread across Australia, Canada, and Argentina.

The only two companies ahead of them in the lithium production race are U.S.-based Albemarle Corp (ALB.N) and Chile’s SQM (SQMA.SN).

Paul Graves has outlined his vision, which includes expanding Arcadium’s presence in Western Australia’s esteemed lithium districts.

Despite being the world’s primary lithium supplier, Australia has witnessed frenzied buyout activity this year, with global chemical firms facing challenges as mining magnate-led companies acquired blocking stakes.

Albemarle’s $4.3 billion deal with Liontown Resources (LTR.AX) fell through after Hancock Prospecting acquired a substantial 20% shareholding in Liontown.

This move emphasized the potential of Hancock Prospecting as a project partner.

Graves commented on the significance of Western Australia’s assets, stating, “If you want to be owning and operating the best asset, you have to be working over here.”

However, for Arcadium, there appears to be no immediate need for a partner, given its existing capital and expertise to develop projects. “Maybe for some people it does make sense to have an experienced Australian miner as a partner. That won’t be the case for Arcadium.”

Under the proposed deal, Allkem shareholders will receive one share in the new entity, with the company ultimately owning 56% of the combined firm.

Livent shareholders, on the other hand, will receive 2.406 shares in the newly christened Arcadium Lithium for each existing share.

Despite recent price drops due to concerns about a slowdown in electric vehicle adoption, major lithium producers, including Livent, remain optimistic about long-term demand.

Livent Corp recently posted a lower-than-expected quarterly profit, citing expansion delays in Argentina as the cause.

Both companies estimate that the merger will yield pre-tax operating cost synergies of approximately $125 million annually by 2027.

The Kroll report highlights the potential for shared infrastructure, coordinated operations, and more efficient logistics due to the proximity of Allkem and Livent’s operating and development assets in Argentina and Canada.

Livent was established in 2018 when FMC Corp (FMC.N) spun off its lithium division, while Allkem came into being in 2021 through the merger of Galaxy Resources and Orocobre.