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Albemarle Corp (ALB)

In the headlines for throwing money at an unresponsive ASX lithium play Liontown (ASX:LTR), the US-based lithium manufacturer Albemarle has all kinds of red flags for Wolfe.

Liontown on Tuesday rejected a takeover offer from the lithium giant valuing the mine developer at $2.50 per share – a big premium to Monday’s closing price of $1.54.

Ablemarle has built a ~2.2% stake on-market, previously offered $2.35 per share on 3 March, and $2.20 per share on 20 October 2022. There’s a smack of desperation in the air and everyone knows it. Josh Chiat as ever has all the juiciness on the LTR play.

“In coming to its decision, the Liontown board noted the opportunistic timing of Albemarle’s indicative proposal, coinciding with recent softness in companies exposed to the lithium sector and the pre-production status of the Kathleen Valley project.”

ALB has a short interest of 4.6% and an earnings quality score of just 1. Albemarle disgraced itself again in the new bid to acquire LTR, which holds two lithium deposits here.

RBC’s US analyst Arun Viswanathan says investors may not look favourably on ALB were it to make another attempt at a deal at an increased offer price given lithium prices are falling.

If they continue to fall, projects like Kathleen Valley could be available cheaper later in the year, according to Viswanathan, but there are positives as well, he noted.

“With that said, if the deal did go through, we see three positives: 1) ALB would increase its backward integration and have greater access to spodumene resources, 2) ALB would gain more control over how much supply comes online, and 3) ALB would have greater control of when new supply comes online.

“Recall ALB had ~200ktpa LCE of conversion capacity in 2022 ramping to 500-600ktpa by 2030e, and therefore is likely interested in securing more spodumene resource capacity.”

Shares of Albemarle are up 3.5% in 2023.

Albemarle investors have fled the giant over the last month, on fears for the slumping price of lithium carbonate prices in China.

It’s down 35% over the last month.

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