Shareholders in Allkem have to come to grips with the reality...

Shareholders in Allkem have to come to grips with the reality that the most recent underperformance by Livent is not an aberration but a feature of Livent under the management of Pall Graves. Ever since being calved off from FMC Corporation in 2018 with Mr Graves in charge the stand-alone Livent has underperformed.

Furthermore, shareholders in Allkem have to understand that Pall Graves and Livent are undertaking a classic manoeuvre underperforming companies do and that is to buy better performance. Allkem is effectively being used as a get out of jail card for and by Mr Graves: on the back of Allkem's tier one assets and its strong pipeline of development projects the combined Newco under PG's leadership will likely show improved performance for a period in comparison to how Livent by itself would have performed. But when a key reason for Livent's underperformance is the lack of ability of Pall Graves then in time with PG holding the reins Newco's performance will tend to regress to the level of underperformance that Mr Graves is able to deliver.

I suppose I can understand why Mr Graves is not very good at running mining and industrial companies, he after all rose to where he is by being no doubt a smooth talker and a no-holds-barred salesman: he seems not to have a grounding in running actual businesses that extract minerals and produce chemicals. A tell that he lacks the ability as a keyman company manager is the fact that FMC Corporation did not keep him on. They hired him from Goldman Sachs and they had time to weigh him and to measure him but in the end they apparently found him wanting so cut him adrift with their lithium business. And here's a tell that he simply does not "get" mining companies: in the joint presentation with Allkem's Martin MD to announce the merger, PG said there was as good as no synergies in having Allkem's James Bay and Livent's Whabouchi project in close proximity to each other and yet Martin MD and Allkem's Australian operations boss, Liam Frankyn, both have highlighted the point that one of the attractions of the merger is the synergies between those two projects. In that joint announcement Mr Graves did his level best to stay vague and generic in his comments - obviously working on the notion that it is better to remain silent and give the impression of ignorance than to speak and confirm it - but in my view we were given a glimpse of his ignorance in his no synergies observation.

I can 100% see the attraction of Allkem merging with Livent. What I cannot understand is why the Allkem Board is selling out AKE holders with a 56:44 split of shares, a 50:50 split of Board members and the chronically underperforming Pall Graves effectively getting all the marbles. Given all that has happened since the merger was announced I think it would be far more fair and reasonable for AKE holders for a 60:40 share split, a 7:5 Board split and someone other than Pall Graves being CEO. I am looking forward to what the Independent Expert, Kroll, has to say.