Lithium Giant Albemarle Spurned in $3.7 Billion Liontown Bid

(Bloomberg) — Albemarle Corp., the world’s top lithium producer, has had its A$5.5 billion ($3.7 billion) cash offer for Liontown Resources Ltd rejected by the Australian developer, sending shares in the target up almost 70% and fueling expectations of wider consolidation.

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The mining giant had offered to acquire all of Liontown’s equity at A$2.50 a share, its third bid in five months, the Perth-based company said on Tuesday. The proposal, a 64% premium to Monday’s closing price, comes after a slump in lithium prices from last year’s record and a corresponding drop in Liontown’s share price.

Liontown owns one of the most promising early-stage lithium projects in Australia, the world’s top exporter of the battery metal, and has supply agreements with major automakers including Tesla Inc. and Ford Motor Co. Explaining its decision to knock back Albemarle, it cited a forecast fivefold growth in global lithium demand by 2030 and a predicted supply deficit.

“There’s a lot of dry powder for lithium M&A but many players have been waiting for toppy pricing to come off,” Credit Suisse analyst Saul Kavonic said.

The Australian miner rallied to close at A$2.57 on Tuesday, a record high.

Albemarle has been expanding output and investing in new facilities to meet rising long-term demand for electric vehicle batteries and to help the firm comply with President Joe Biden’s push to ensure suppliers favor production in the US or free-trade partner nations. The company already has a major presence in Australia, with stakes in two major hard-rock lithium mines and a recently completed lithium hydroxide refinery south of Perth.

“Albemarle is prepared to engage immediately in discussions with Liontown to work toward a mutually acceptable definitive agreement,” the US-based miner said. It said Liontown’s board had “not meaningfully engaged”.

READ: Insatiable Lithium Demand Fuels Investment Boom in Australia

Liontown’s mine at Kathleen Valley is a “unique, long-life project” in Western Australia that could ramp up production more quickly if held by a company with a larger balance sheet, Citigroup Inc. analyst Kate McCutcheon said in a note, adding Albemarle would need to increase its offer to get Liontown’s board back to the negotiating table.

Liontown said it rebuffed earlier proposals by Albemarle of A$2.35 per share on March 3, and A$2.20 per share on Oct. 20. Liontown said a subsidiary of Albemarle holds about 2.2% of its shares.

–With assistance from David Stringer and Clara Ferreira Marques.

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