Lithium, News, Takeover bids

Why did Liontown reject the Albemarle takeover?


On Monday, lithium company Albemarle submitted a non-bonding proposal to acquire all outstanding shares of Liontown Resources – a battery metals exploration and development company – for a cool $5.2 billion.  

The deal comprised $2.50 per Liontown share in cash, representing a 69 per cent premium to Liontown’s 30-day volume-weighted average price.  

In a statement, Albemarle called the proposal a “compelling opportunity” for Liontown shareholders. 

Abemarle is a stakeholder in important lithium assets across WA, including spodumene resources and lithium conversion facilities at Greenbushes, Wodgina and Kemerton. The company believes the takeover of Liontown – which has off-take agreements with world-class partners in the battery and automotive sectors – would bolster its lithium capabilities.  

But Liontown was less eager to come to the table. After review, the board unanimously rejected the offer on the grounds that $5.2 billion offer substantially undervalued the company.  

Liontown indicated it had also rejected two earlier indicative proposals from Albemarle: $2.35 per share on March 3 this year, and $2.20 per share on October 20 2022.  

Liontown cited its Kathleen Valley lithium project, about which the company said there are few other lithium assets of comparable “scale, quality and mine life”.  The company forecasts the Kathleen Valley project to become Australia’s biggest lithium mine. 

Liontown also noted that the project is also underpinned by a forecast growth in global lithium demand, with a predicted supply deficit that is expected to deliver stronger lithium prices for longer. 

The board observed that the Albemarle proposal did not reflect the value of this asset. 

The board also called the timing “opportunistic”, as a contractor shortage in January caused the costs of developing the project to skyrocket. 

As reported by Australian Financial Review (AFR), in 2019 Liontown predicted the Kathleen Valley project would cost $240.5 million to build, but in 2023 that figure now stands at $895 million, with a $40 million buffer.  

But Liontown seems to be staying the course with its lithium flagship. 

Industry experts predict that Liontown going public with the takeover offers – which have been quietly ongoing since October – suggests that the company is looking to stir up rival bidders to hit a goal of $3 per share. 

The Australian stock market also paints an interesting picture of the situation.  

Liontown’s shares jumped from a Monday high of $1.54 per share to $2.57 at Tuesday close, while Albemarle peaked on Monday at $329.43 per share and closed out on Tuesday at $326.29 per share.  

Yet Albemarle has not sat still. The company has been building a stake in Liontown via on-market purchases made through its subsidiary RT Lithium – it is estimated that RT Lithium now holds an approximate 2.2 per cent stake in Liontown. 

Earlier this month, Albermarle president of energy storage, Eric Norris, told AFR that the company believed China, Europe and the US could not support their electric vehicle ambitions without WA. 

“We see Australia’s spodumene as being a very viable resource to support [(our)] European expansion strategy,” he said. 

According to reports AFR, the successful takeover of Liontown would take Albemarle’s total investment in WA lithium assets to over $10 billion.  

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