Two major lithium producers from Australia and the United States are merging to create one of the world’s largest companies producing the metal.
On Wednesday, Allkem (TSX: AKE) (ASX: AKE) and Livent (NYSE: LTHM) announced that they would be combining to create a leading international lithium chemicals producer in an all-stock merger valued at approximately US$10.6 billion. The company will be headquartered in North America with a specific location to be announced later.
The transaction is expected to close by the end of the year with Allkem shareholders owning a 56 per cent stake and Livent shareholders possessing the remaining 44 per cent of the new company. It will only be smaller than Sociedad Quimica y Minera de Chile (NYSE: SQM) and Albemarle Corporation (NYSE: ALB).
> @Allkem and @LiventCorp in lithium $10bn mega merger
Immediate scale is key here: more production clout, offer customers bigger contracts, & increases lithium pricing power
What’s most interesting is what comes next, esp for Canada & Argentina https://t.co/M29Y019xog
— Simon Moores (@sdmoores) May 10, 2023
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Livent’s CEO will lead the new firm
The two companies possess lithium brine facilities in Argentina and are both in the process of developing lithium mines in Canada within a reasonable proximity to each other. Livent’s CEO Paul Graves says the merger should help propel faster growth and better efficiency at those operations.
“As a combined company, we will have the enhanced scale, product range, geographic coverage, and execution capabilities to meet our customers’ rapidly growing demand for lithium chemicals,” said Graves. He is set to become the CEO of the new company once everything is finalized.
The new lithium producer is expected to have annual operating synergies of approximately US$125 million per year before taxes. Through a combination of Livent’s technical capabilities and strong customer relationships and Allkem’s robust and diverse resource base, the companies believe the merger will put them in an ample position to capitalize on the growing demand for lithium.
“We are bringing together two highly complementary businesses to create a leading global lithium chemicals company, building on Allkem’s demonstrated track record of integration,” said Allkem’s CEO Martín Pérez de Solay.
“The combination brings together teams with strong expertise in project development, product innovation, and marketing, and sets us up for a faster and de-risked delivery of the next phase of our growth,” he added.
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Allkem has a series of projects throughout Argentina, Australia, Japan and Canada. Livent has lithium manufacturing facilities throughout China, Argentina, England and the United States.
Last week, Allkem identified a new high-grade lithium zone at its James Bay project in northern Quebec.
A recent report from the French market researcher ReportLinker indicated that the global market for lithium would be worth approximately US$13.8 billion by 2027, ascending from its current value of about US$7 billion.
Allkem’s shares rose significantly Wednesday by 10.15 per cent to $12.80 on the Toronto Stock Exchange.
Livent stock shot up by 5.22 per cent to US$25.50 on the New York Stock Exchange.
rowan@mugglehead.com
