Allkem in $15.7bn lithium merger with US-based Livent

·3-min read

One of the ASX's biggest lithium producers has agreed to a $15 billion merger of equals with a US counterpart, amid rising demand for the vital component in electric vehicle batteries.

Brisbane-headquartered Allkem, which is focused on lithium production in Argentina, said on Thursday it had agreed to an all-stock merger with the New York Stock Exchange-listed Livent.

The deal will create an entity among the top ranks of the world's battery-grade supply chain.

Its global footprint will include Western Australia, Canada and Argentina as well as processing plants close to customers in Japan, China and the United Kingdom to serve the world's fast-growing electric vehicle market.

Current Allkem shareholders would own 56 per cent of the combined company, which at recent stock prices would be worth $US10.6 billion ($A15.7 billion).

Livent president and chief executive Paul Graves, who will be CEO of the new company, said he was excited for what lay ahead, with the combined forces to help power the transition to electric vehicles, cleaner energy and a more sustainable future.

"We look forward to playing an even bigger role in the acceleration of decarbonisation policies by providing the lithium needed to enable this critical global energy shift," he said.

Mr Graves said the combined company would have the enhanced scale, product range, geographic coverage and execution capabilities to meet customers' growing demand for lithium chemicals.

"We will have a production presence in three major lithium geographies, that is Western Australia, Canada and South America," he told a webcast.

"Operationally, we expect to grow production capacity to grow to 250,000 tonnes per year by 2027."

Allkem chief executive Martin Perez de Solay, who will take an advisory role, called the deal transformational.

"We are bringing together two highly complementary businesses to create a leading global lithium chemicals company, building on Allkem's demonstrated track record of integration," he said.

Allkem was formed via the 2021 merger of ASX-listed lithium miners Galaxy Resources and Orocobre, a tie-up that made it the world's fifth-biggest lithium producer.

Mr de Solay said the latest merger would transform Allkem into a "truly global player, with listings in the US and Australia".

The combined entity, which is yet to be named, will have a primary listing on the New York Stock Exchange, with a secondary listing on the ASX via a CHESS Depository Interests (CDI).

Its corporate headquarters will be in North America and current Allkeem non-executive chairman Peter Coleman will be its chairman.

Philadelphia-headquartered Livent excels in lithium processing technology, while Allkem has complementary expertise in conventional brine-based lithium extraction, the companies said.

They expect the merger will save $US125 million a year plus $US200 million in one-off savings, due in part to how close together some of the two companies' assets are in Argentina and Quebec.

Allkem also has operations in Australia, mining the lithium ore known as spodumene concentrate at Mt Cattlin, WA, for export to Asia.

RBC Capital Markets analyst Kaan Peker said RBC saw the merger as value accretive and raised its price target on Allkem by about 11 per cent to $14. Based on the company's last closing prices, he estimated the merger had a seven per cent premium for Allkem shareholders.

The companies hope to complete the deal this calendar year.