Rio Tinto PLC ADR (NYSE:RIO) has announced a definitive agreement to acquire Arcadium Lithium plc (NYSE:ALTM) in an all-cash deal valued at $6.7 billion.
What Happened: As per the press release on Wednesday, the acquisition price of $5.85 per share represents a 90% premium over Arcadium's closing price on Oct. 4.
According to Benzinga Pro, at the time of writing, Arcadium was up by 29.48% in pre-market since its Tuesday close while Rio was trading 1.16% lower than its previous day's closing price.
The transaction will integrate Arcadium's lithium operations into Rio Tinto's portfolio, positioning the company as a leader in energy transition commodities. Arcadium, a vertically integrated lithium chemicals producer, boasts a production capacity of 75,000 tonnes of lithium carbonate equivalent annually, with plans to double by 2028.
This acquisition comes at a time when Rio Tinto is in heated debates with the Serbian government on a proposal to ban lithium and borate mining, a move that could impact Rio Tinto's significant mining project in the country's western region.
As per Reuters on Monday, Serbia reinstated Rio Tinto's license in July to develop what is poised to be Europe's largest lithium mine, reversing a previous government decision influenced by environmental protests.
The Jadar lithium project, valued at $2.4 billion, is expected to fulfill 90% of Europe's current lithium demand, potentially establishing Rio Tinto as a key player in the global lithium market.
Rio Tinto's CEO, Jakob Stausholm, emphasized the strategic importance of this acquisition, stating it aligns with the company's long-term goals and enhances its capabilities in lithium production. Arcadium's CEO, Paul Graves, expressed confidence in the deal, highlighting its potential to accelerate Arcadium's growth strategy.
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The acquisition, approved by both companies' boards, is expected to close by mid-2025, pending shareholder and regulatory approvals. This strategic move comes as Rio Tinto aims to capitalize on the growing demand for lithium, driven by the global energy transition.
Why It Matters: The acquisition of Arcadium Lithium marks a significant step for Rio Tinto in its ambition to become a major player in the global lithium market. Earlier in October, Rio Tinto confirmed its interest in acquiring Arcadium, a key supplier for Tesla Inc., which caused Arcadium's shares to surge. This acquisition positions Rio Tinto as one of the largest lithium producers worldwide, trailing only behind industry giants like Albemarle Corp and SQM.
In June, Rio Tinto announced plans to initiate Europe's largest lithium project by 2028 in Serbia. The Jadar project, which has been on hold since 2022, is set to produce 58,000 tons of refined battery-grade lithium carbonate annually. This project is expected to supply 17% of Europe's electric vehicle production needs, underscoring Rio Tinto's strategic focus on the lithium market.
