Albemarle Corporation (NYSE: ALB) announced Sunday that it was withdrawing last month’s $6.6 billion bid to acquire the Australian company Liontown Resources Limited (ASX: LTR) over “growing complexities” associated with the transaction.
Primarily, the takeover was thwarted by the iron ore mining company Hancock Prospecting, owned by Australia’s richest woman Gina Rinehart, raising its stake in Liontown to 19.9 per cent. This made Rinehart the largest shareholder in the company with enough influence to potentially prevent the deal from moving forward.
“Our engagement with the Liontown team has been meaningful and productive. That said, moving forward with the acquisition, at this time, is not in Albemarle’s best interests,” said Albemarle’s CEO Kent Masters.
If Hancock raised its take in Liontown to 20 per cent or more it would be required to make an offer to purchase the remaining shares of the company so that minority shareholders had an opportunity to exit due to Hancock’s growing influence — as mandated by Australian law. The iron ore miner is staying just below that percentage and aims to be a prominent influence in Liontown’s future operations.
“We acknowledge Albemarle’s decision. They were constructive and respectful throughout the diligence process,” said Liontown’s Managing Director Tony Ottaviano.
Kathleen Valley is one of the world’s largest undeveloped lithium projects
Following withdrawal of the takeover bid, Liontown is now seeking an alternative source of funding for continued development of its flagship Kathleen Valley lithium project near Perth, Western Australia.
Liontown is aiming to commence lithium production at the site mid-way through next year. The company has already initiated supply agreements with major companies like Tesla Inc (NASDAQ: TSLA) and Ford Motor Co (NYSE: F).
According to a media report citing anonymous sources familiar with the matter, the company has considered getting the Swiss investment bank UBS Group AG (SWX: UBSG) to assist with raising capital for the lithium operation.
Liontown halted trading until October 18 following the announcement while it looks to finalize funding for the project; its stock is currently worth C$2.41 on the Australian Securities Exchange.
Albemarle will be releasing its financial results for Q3 on November 1; the company’s shares rose by 2.7 per cent Monday to US$167.80 on the New York Stock Exchange.