Recent merger news has been buffeting the lithium sector today — a new reveal from lithium producer Allkem [ASX:AKE] and the US’ Livent.
Allkem and NASDAQ-listed Livent are two major lithium powers of their own respective markets. Yesterday, they revealed that they will be joining forces to form one huge lithium corporation worth nearly $16 billion.
By lunch time on Thursday, AKE was tearing up the trade charts by 16% as more investors digested the magnitude of the venture.
AKE is now up by 30.5% versus the S&P 200, and 38% in the month alone:
Source: TradingView
Allkem blends with Livent in mega lithium venture
The merge of Allkem and Livent is good news for green energy investors. The megamerger will create the world’s biggest producer of white metal for use in the electric vehicle industry. This will create an industry powerhouse that will span four continents and hoist a skills and supply boost for the sector.
The combined global lithium chemicals producer could manifest a combined revenue of about US$1.9 billion and an adjusted EBITDA of approximately US$1.2 billion —based on pro-forma data from 2022.
The lithium powerhouse was touted as a geographically high quality and low-cost asset portfolio in Argentina and Canada. This is expected to create more opportunities to both accelerate and de-risk the development of a strong pipeline of attractive growth projects.
It’s also expected to deliver production capacity of approximately 250k tonnes a year of lithium carbonate — equivalent the 2027 calendar year.
Allkem anticipates significant run-rate operating synergies of approximately US$125 million per annum (pre-tax) and one-time capital savings of approximately US$200 million.
This would be driven mainly by asset proximity and co-development in Argentina and Canada.
Additional synergies will be expected beyond 2027.
Livent is a global leader in lithium processing technologies. It has nearly eight decades of experience in producing a diverse range of lithium chemicals for energy storage and other specialty applications. Livent will benefit from Allkem’s conventional brine-based lithium extraction, hard rock mining, and lithium processing.
The deal is anticipated to close by the end of 2023, and Allkem shareholders will get one share for each of their shares.
Ultimately, the company will own 56% of the new enterprise, whereas Livent shareholders will receive 2.406 new shares for each existing share.
CEO of Livent Paul Graves will become CEO of the new enterprise, and Allkem’s CEO Martin Perez de Solay will be the advisor.
Mr Graves believes the best approach to the lithium dream is to ‘be big enough to finance’ and to do it quickly.
Now that the group has teamed up with Allkem, this philosophy will be achieved via the new high production rate and strength of a blended asset base across major lithium zones in Canada, Argentina and Australia.
The combined enterprise will offer customers the full spectrum of lithium products, from spodumene to carbonate to hydroxide and other specialities.
The high interest in shares today proves that investors can see what a game changer this could be for the lithium supply chain, and the setting of a certain standard that may become the norm in the future.
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