Livent shareholder files US lawsuit over $16bn lithium merger with Allkem
Allkem's Olaroz lithium operations in Argentina. Picture: Allkem
Allkem’s blockbuster merger with US lithium company Livent faces a potential US legal threat, with a shareholder lawsuit alleging Livent’s board and management traded off shareholder value in order to protect their jobs in the merged entity.
The US lawsuit, filed in Delaware’s Chancery court by Livent shareholder Craig Bailey, does not seek to block the merger, but alleges Livent sent “materially misleading and omissive” filings to US shareholders in support of the Allkem deal, pitched to both the US and Australian markets as a merger of equals.
The legal action seeks access to internal Livent documents, including minutes of board meetings, to help an investigation into whether Livent’s management sought to feather their own nests rather than protect shareholders interests during the merger negotiations.
The merger was approved by the shareholders of both companies this week, and will take effect in early January.
Under the deal Livent boss Paul Graves will become the chief executive of the merged company, Arcadium Lithium. Allkem managing director will retire from the company when the merger takes effect, with Allkem chairman Peter Coleman to lead the Arcadium board.
Allkem shareholders will emerge with 56 per cent of the combined company, with Livent holders controlling 44 per cent.
Ahead of the Allkem vote to approve the deal this week several significant Australian shareholders, including superannuation major Ausbil, expressed opposition to the deal on the grounds it did not value Allkem’s assets highly enough.
But the US lawsuit alleges the opposite, accusing Livent’s board -- led by Pierre Brondeau -- of giving backtracking from an earlier negotiating position, that the US company’s shareholders should emerge with 47 per cent of Arcadium, in order to ensure Mr Graves and other Livent executives and directors preserved their positions.
“Livent’s insiders were using the ownership percentages as a bargaining chip to negotiate their roles in the post-close company,” the lawsuit alleges.
Mr Bailey’s lawsuit also suggests Livent delayed the announcement of a commercial deals until after the merger terms were set -- including a deal appointing Livent as the marketing manager for lithium produced at Namaska Lithium’s Whabouchi project in Canada, which is 50 per cent owned by Livent.
“Stockholder has credible suspicions concerning management’s awareness and inclusion of this agreement in the preparation of the forecasts,” the complaint says.
“Plaintiff is justifiably concerned that the proposed transaction is not the result of a full and fair process, but instead one manipulated by certain members of the company’s board and/or management, who had their own motives in pursuing the proposed transaction.”
Allkem is not named as a party to the lawsuit, which has been filed under a US law allowing investors to access company records if they have credible concerns that boards and management have been serving their own interests at the expense of shareholders.
The lawsuit does not seek to block the transaction, only to trigger the release of documents. Similar legal actions in the US have been used to gather information before suits are lodged seeking compensation on behalf of shareholders that believe they have lost money as a result of poor company governance.
Allkem declined to comment as the matter is before the courts in the US, and Livent has not issued a statement on the matter.
Allkem shares were down 65c to $9.76 at 1445 AEDT.
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