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Arcadium’s $10b takeover exposes brutal reality of listed life
A $15.7 billion merger one year, gone in a not-quite $10 billion takeover the next. Time frames are not always as long as we like to think in listed equities.
Anthony MacdonaldOct 9, 2024 – 6.48pm
Chanticleer



Arcadium Lithium chairman Peter Coleman. David Rowe normal

Sound deal
Did Arcadium lose an asset? Did it forget how to produce lithium hydroxide? Did it stop growing? Was it going broke? Is the whole EVs and batteries story busted?

The answer to all of the above is no. In fact, the deal that created Arcadium worked. Operationally, it was sound. Financially, it made sense. EVs are still coming.

The only thing that changed was lithium pricing – the price of both spodumene and hydroxide is about one-third what it was 18 months ago. It hit Arcadium’s revenue, earnings and ability to fund future projects, which slowed its likely growth. The share price tanked.

If you truly take a long-term view and believe Arcadium’s assets are as good as the board says, you shouldn’t be able to justify selling out so soon and at such a price. Arcadium’s board knew their company needed time to realise its potential when it mapped out that deal to mash ASX-listed Allkem and US chemicals group Livent together in May last year.

But unfortunately, that is not how listed markets work. And when a cashed-up bidder like Rio Tinto turns up, offering about twice what the shares were trading at and a premium to the net asset value (a number lowered by lithium price forecasts), it is nearly impossible for a board to say no. They can talk long-term all they like, but daily share prices, half-yearly reporting and three-year earnings forecasts anchors everyone in the short term.

ASX’s biggest takeover this year
So we expect Arcadium will be gone with barely a whimper. It didn’t get the time it needed.

The deal works for Arcadium investors – who can also see its daily share price – and Rio Tinto, which has enough capital and a big enough portfolio to be able to look past the lithium price crash. It is a win/win from that perspective.

At nearly $10 billion, it is the ASX’s biggest takeover this year. It is a bit cheeky to consider it an Australian deal when Arcadium’s primary listing is the NYSE, its board meets in Ireland for tax reasons and less than half of its stock trades as ASX-listed securities. However, we’re sure the investment banks and law firms involved will claim it.

Indeed, it’s the sort of deal that makes us think it is the investment banks that usually win. UBS, which guided Allkem through the merger with Livent (a deal that completed in early January), is back in Arcadium’s corner alongside M&A boutique Gordon Dyal & Co (Livent’s mates), while JPMorgan and Goldman Sachs advised Rio Tinto.

The way it came together and is now going, and so quickly, makes Arcadium the $10 billion deal we will not be talking about in years to come; it just never got long enough to establish itself. It didn’t get the time to win a core following in Australia’s institutional equities set, or with retail investors.

The assets will live on with Rio Tinto – and it will be interesting to see how the big miner goes. Lithium’s been a bit of a slog to date. However, the deal shows Jakob Stausholm’s team really is serious about building a bigger lithium business.