Australia Lithium Producer Allkem & United States Livent Corp Announced $10.6 Billion Merger in All-Stock Deal to Create World 3rd Largest Lithium Producer with 7% of Global Output by 2027, Lithium is Key Metal Used in Batteries of Electric Vehicle
13th May 2023 | Hong Kong
Australia lithium miner Allkem & United States Livent Corp have announced a $10.6 billion merger in an all-stock deal to create the world’s 3rd largest lithium producer with 7% of global output by 2027. Lithium is a key metal used in batteries of electric vehicle. See below for more info.
“ Australia Lithium Miner Allkem & United States Livent Corp Announced $10.6 Billion Merger in All-Stock Deal to Create World 3rd Largest Lithium Producer with 7% of Global Output by 2027, Lithium is Key Metal Used in Batteries of Electric Vehicle “
Australia Lithium Miner Allkem & United States Livent Corp Announced $10.6 Billion Merger in All-Stock Deal to Create World 3rd Largest Lithium Producer with 7% of Global Output by 2027
- Allkem and Livent to Create a Leading Global Integrated Lithium Chemicals Producer
- Allkem and Livent announce definitive agreement to combine in an all-stock merger of equals valuing the combined company at US$10.6 billion (A$15.7 billion) 1
Key Highlights
- Creates a leading global lithium chemicals producer, with pro-forma CY’22 combined revenue of approximately US$1.9 billion2 and adjusted EBITDA of approximately US$1.2 billion
- Immediately enhances business-critical scale and global capabilities from closing, strengthening the ability to serve customers with a more resilient supply chain
- Vertically integrated business model allows enhanced operational flexibility and potential for greater value capture across the value chain
- Geographically adjacent, high quality, low-cost asset portfolio in Argentina and Canada creates opportunities to both accelerate and de-risk the development of a strong pipeline of attractive growth projects expected to deliver production capacity of approximately 250ktpa LCE by CY’27E3
- Significant expected run-rate operating synergies of approximately US$125 million per annum (pre-tax) and one-time capital savings of approximately US$200 million, driven mainly by asset proximity and co-development in Argentina and Canada. Additional synergies expected beyond CY’27E
- Strong combined balance sheet and cash flow generation provide financial flexibility to deliver accelerated growth plans
- Enhanced value proposition for shareholders, customers, employees, and local communities, with an unwavering commitment to sustainability and responsible growth
Allkem (ASX:AKE) and Livent (NYSE:LTHM) today announced the signing of a definitive agreement (“Transaction Agreement”) to combine the two companies to create a leading global lithium chemicals producer (“NewCo”), (the “Transaction”). The Transaction is expected to close by the end of calendar year 2023, and upon closing of the all-stock merger of equals, Allkem shareholders will own approximately 56% and Livent shareholders will own approximately 44% of NewCo4.
Allkem and Livent, two global lithium chemicals companies, will combine their highly complementary range of assets, growth projects, and operating skills across extraction and processing under a vertically integrated business model with the scale and expertise to meet the rapidly growing demand for lithium chemical products. The combined company will have a significant footprint of low-cost assets diversified across key geographies, products, and customers. Given the proximity of certain assets in Argentina and Canada, significant cost synergies and capex savings, in addition to other anticipated commercial synergies, are expected to be realized from the opportunity to co-develop and de-risk future expansion projects and operations.
Livent is a global leader in lithium processing technologies with nearly eight decades of experience producing a diverse range of lithium chemicals for energy storage and other specialty applications. Allkem brings complementary expertise in conventional brine-based lithium extraction, hard rock mining, and lithium processing. With Livent’s technical and commercial capabilities and its deep customer relationships, and Allkem’s large and diverse resource base and significant growth pipeline, NewCo will be well-positioned to capitalize on the expected growth in lithium demand from electric vehicles (“EVs”) and energy storage solutions.
Livent’s President and Chief Executive Officer, Paul Graves, said: “I am excited for what lies ahead as Livent and Allkem combine forces to help power the transition to EVs, cleaner energy and a more sustainable future. We look forward to playing an even bigger role in the acceleration of decarbonization policies by providing the lithium needed to enable this critical global energy shift. 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. This transaction will capitalize on our highly complementary business models and our collective strengths, including our best-in-class technologies, assets, and people, to be a leading force in our industry driving growth in EV and energy storage applications. Together we can accelerate our growth plans and deliver more lithium, more reliably, and more quickly, than either of us can do alone. Jointly, we are committed to growing responsibly and supporting the communities where we operate, and we look forward to executing on our shared long-term vision.”
Allkem’s Chief Executive Officer, Martín Pérez de Solay, said: “The combination of Allkem and Livent is transformational with compelling strategic logic and marks a significant milestone in our efforts to grow the company. 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. The vertically integrated NewCo will improve delivery of high-quality, value-added products to our diverse customer base and unlock material synergies. 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. I believe Allkem shareholders will realize significant benefits from the Transaction as the business transforms into a truly global player with listings in the US and Australia. We will maintain our joint commitment to safety, quality, and productivity and through increased scale we can also improve outcomes for our employees, customers, partners, and the communities in which we operate.”
Strategic Benefits of the Combination
- Creates a leading global lithium chemicals producer with enhanced business-critical scale and greater capacity to meet growing customer demand
- Large, high quality, low-cost asset footprint with one of the world’s largest lithium deposit bases
- Multiple lithium chemical manufacturing facilities able to deliver a broad range of lithium performance chemicals globally
- Increased economies of scale and resources through NewCo’s geographically adjacent asset portfolios in Argentina and North America
- Leading Americas-based lithium platform with ability to serve growing regional demand amid customer focus on assured security of supply and more localized supply chains
- Positioned to be a leading battery-grade lithium supplier
- Large and growing global customer base across EV and energy storage value chains, with strong customer relationships from both companies
- Highly complementary and vertically integrated business model
- Enables vertical integration across the lithium value chain with the broadest product offering
- Highly scalable across both resource and production assets; expected to immediately enhance operational flexibility and reliability, resulting in lower cost and greater value capture
- Complementary expertise in brine and hydroxide processing with proven ability to produce high-quality products that are sought after by leading battery manufacturers and EV OEMs
- Expansion of R&D capabilities to develop innovative and sustainable products and processes
- Greater capacity and execution expertise to accelerate growth
- Allows delivery of growth commitment faster and de-risks path to approximately 250ktpa LCE by CY’27E5
- Significant pipeline of advanced growth projects to create value for all stakeholders
- Complementary expertise in hard rock mining, conventional and DLE-based processes, and lithium carbonate and hydroxide production
- Creating a global leader to capture the decarbonization opportunity through EV and battery storage solutions
- Sector-leading ESG policies with a shared commitment to grow responsibly and pursue best practices across environmental stewardship, sustainability, community development, and corporate governance
- Participation in industry efforts to advance transparency, safety, responsible operations, rigorous supply chains, and community engagement and development
Significant Financial Benefits
The combination is expected to create substantial value for the shareholders of both companies through:
- Value creation from the synergistic combination and close proximity of assets, with additional synergies expected beyond CY’27E
- Estimated run-rate operating cost synergies of approximately US$125 million (pre-tax) per annum from SG&A, asset optimization, and logistics and procurement savings. A significant portion of the synergies are expected to be realized through removing duplicate costs, improvement of procurement, site management, transport, and logistics functions at Sal de Vida, Hombre Muerto, and Québec, and through closer integration of operations. The majority of the annual run-rate pre-tax operating cost synergies are expected to be realized within three years
- Further synergies are expected to be realized from the sharing of technological expertise, improved flexibility in product flows, plant optimization, and enhanced marketing efficiencies
- In addition to operating synergies, NewCo is expected to realize approximately US$200 million in one-time capital expenditure savings, driven by the consolidation of shared infrastructure, streamlining construction and procurement, and leveraging complementary engineering work at Hombre Muerto and Sal de Vida, as well as at a co-located spodumene to hydroxide facility processing materials from the Québec spodumene resources.
- Transaction metrics
- Exchange ratio determined based on each Company’s estimated relative contribution to risk-adjusted net asset value (“NAV”) (pre-synergies)
- Transaction is expected to be immediately accretive to both Livent’s and Allkem’s shareholders on a NAV per share basis, reflecting the material synergies expected to be realized from the Transaction (net of costs to achieve)
- The transaction results in Allkem shareholders owning approximately 56% of NewCo compared to 53% implied by the volume weighted average share prices over a one-month period.6
- Stronger financial profile positions the combined entity to deliver growth
- Strong balance sheet with combined liquidity of US$1.4 billion and limited indebtedness7
- Positive cash flow generation provides the financial strength needed to accelerate the growth strategy
- Greater liquidity for investors and more diversified shareholder base
- Greater liquidity for investors through a primary listing on the New York Stock Exchange (“NYSE”) and a foreign exempt listing on the Australian Securities Exchange (“ASX”) via CHESS Depository Interests (“CDIs”)
- Seeking US index inclusion on implied combined market capitalization and pro-rata CDI inclusion in the S&P / ASX 200 index
Tax-free all-stock transaction
- Share for share exchange transaction expected to be a tax-free transaction for shareholders
Transaction Structure
NewCo will have a primary listing on the NYSE and maintain a foreign exempt listing on the ASX (via the issue of CDIs to Allkem shareholders). Under the terms of the Transaction, existing Allkem shareholders will receive one NewCo ASX listed CDI (or be able to elect to receive one NewCo NYSE listed share instead of a CDI) for each Allkem ordinary share held, except for shareholders in certain ineligible jurisdictions, who will receive cash proceeds from the sale of the NewCo CDIs in lieu of such CDIs after closing. Under the Merger, Livent shareholders will receive 2.406 NewCo NYSE listed shares of common stock for each Livent share held. Following the Transaction, Allkem and Livent shareholders are expected to own approximately 56% and 44% of the combined company, respectively.
Governance and Leadership
The Transaction Agreement and the Transaction have been unanimously approved by the Board of Directors of each company, and in the case of Allkem, subject to the Independent Expert concluding, and continuing to conclude, that the Scheme is in the best interest of Allkem shareholders. The combined company will benefit from proven and experienced business leaders at both the Board and executive levels, along with diverse, high-performing teams at NewCo’s operating sites. NewCo is to be incorporated in the Bailiwick of Jersey, with corporate headquarters to be in North America, with the exact location and company name to be announced at a later date, and corporate residency to be in Ireland.
Upon completion of the Transaction, Peter Coleman will become the Chairman of NewCo, Paul Graves will become the CEO of NewCo, and Gilberto Antoniazzi will become the CFO of NewCo. The NewCo Board will have 14 members, consisting of 7 directors designated by Allkem and 7 directors designated by Livent. The commercial, operational, and capital deployment teams will be comprised of representatives from both companies. Allkem CEO, Martín Pérez de Solay, will provide consulting services to NewCo to help facilitate a smooth integration process post transaction close.
About Livent
For nearly eight decades, Livent has partnered with its customers to safely and sustainably use lithium to power the world. Livent is one of only a small number of companies with the capability, reputation, and know-how to produce high-quality finished lithium compounds that are helping meet the growing demand for lithium. The Company has one of the broadest product portfolios in the industry, powering demand for green energy, modern mobility, the mobile economy, and specialized innovations, including light alloys and lubricants. Livent has a combined workforce of approximately 1,350 full-time, part-time, temporary, and contract employees and operates manufacturing sites in the United States, England, China, and Argentina. For more information, visit livent.com
About Allkem
Allkem is a specialty lithium chemicals company with a global portfolio of diverse and high-quality lithium chemicals. Headquartered in Buenos Aires, Argentina, the company’s unique portfolio includes lithium brine operations in Argentina, a hard rock lithium operation in Australia, a hard rock development project in Québec, and a lithium hydroxide conversion facility in Japan. Development is underway across the globe to increase international scale and product flexibility to meet significant projected demand growth that is underpinned by a global transition to a net zero carbon future. Allkem’s pillars of success are built on safety, sustainability, cost leadership, and product quality, through relations with our people, partners, customers, and communities. For more information, visit allkem.co.
Notes
1 Based on the combined market capitalization of Allkem and Livent and a USD:AUD foreign exchange rate of 0.676. The market capitalization of Livent (US$5.1 billion) has been calculated by reference to the closing price of Livent shares on NYSE on May 9, 2023, of US$24.23 per Livent share and 209.5 million Livent fully diluted shares on issue. The market capitalization of Allkem has been calculated by reference to the closing price of Allkem shares on ASX on May 9, 2023, of A$12.83 per Allkem share and 641.5 million Allkem fully diluted shares on issue.
2 Allkem’s results are based on its IFRS results for the LTM ended December 31, 2022 and are unaudited. The combined financial information is a simple summation of Livent’s and Allkem’s results for Livent’s fiscal year ended December 31, 2022 and Allkem’s twelve months ended December 31, 2022, and is not presented in accordance with Article 11 of Regulation S-X. Pro forma information prepared according to Article 11 of Regulation S-X may be substantially different from the combined information included in this announcement.
3 Refer to pages 23 to 28 of the Investor Presentation dated May 10th, 2023, which is available to view on www.allkem.co and www.asx.com.au, (Investor Presentation) for information underpinning the production targets, production capacities (and other forward-looking statements of that nature) for NewCo. Allkem confirms that all material assumptions underpinning the production targets, production capacities (and other forward-looking statements of that nature) of NewCo in the Investor Presentation continue to apply and have not materially changed. Refer to page 11 of the Important Information and Legal Disclaimer for further information in relation to the production targets of NewCo.
4 All ownership ratios in this release based on fully diluted share counts
5 Refer to pages 23 to 28 of the Investor Presentation for information underpinning the production targets, production capacities (and other forward-looking statements of that nature) for NewCo. Allkem confirms that all material assumptions underpinning the production targets, production capacities (and other forward-looking statements of that nature) of NewCo in the Investor Presentation continue to apply and have not materially changed. Refer to page 11 of the Important Information and Legal Disclaimer for further information in relation to the production targets of NewCo.
6 This implies a premium of approximately 14% to Allkem shareholders measured using volume weighted average share prices over one-month from April 10, 2023 to May 9, 2023. The premium is calculated assuming Allkem shareholders contribute their shares to the merged entity at an implied price of A$13.54 per share, calculated using the Livent one month volume average weighted price over the same period of US$21.81, the agreed exchange ratio of 2.406 NewCo shares per Livent share, and the daily USD:AUD foreign exchange rates over the period.
7 Merged group pro forma liquidity position based on: (i) Allkem’s available cash position as of March 31, 2023, as set out in Allkem’s March 2023 Quarterly Report, dated April 20, 2023 which was prepared in accordance with the requirements of the Corporations Act 2001 (Cth), Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) (together, “Australian Standards”); and (ii) Livent’s cash & equivalents and available funds under revolving credit facilities position as of March 31, 2023, as set out in Livent’s Form 10-Q dated May 4, 2023 which was prepared in accordance with US GAAP (together, “US Standards”). As the merged group pro forma cash position has not been prepared in accordance with a consistent set of recognised accounting standards (either in accordance with the Australian Standards or the US Standards), this information is provided for illustrative purposes only and shareholders are accordingly cautioned not to place undue reliance on this information.
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