Lithium Manufacturers Allkem, Livent Agree to $10.6 Billion Merger

Editor's note: This is a developing story. Check back for updates. This article was last updated May 11, 2:45 pm.

Lithium producers Allkem Ltd. and Livent Corp. have agreed to a $10.6 billion all-stock “merger of equals,” creating a global lithium chemicals production powerhouse positioned to capitalize on an anticipated surge in lithium demand driven by electric vehicles and energy storage.

The merger announced May 10 would create the world’s third-largest lithium manufacturer, the companies said in a press release. The combination of U.S.-based Livent and Australia’s Allkem will also create an industrial enterprise spanning four continents, with expertise to expand metal supplies to automakers such as Tesla, General Motors and BMW, the companies said.

“Together, we can continue our progress and do more, faster, which helps us deliver our values and to grow in a responsible way,” Livent CEO Paul Graves told analysts May 10. “Increasing the availability of lithium will continue to be a key enabler of decarbonization and the global electrification of transportation. This merger between Livent and Allkem enhances our ability to support this critical process.”

The companies estimate the transaction will generate annual run rate synergies of $125 million per year within three years. Savings would arise from elimination of duplicate costs, mainly at the corporate level; operational efficiencies stemming from close proximity of resources; and operating benefits that come with having broader, more diverse assets that allow for maximized plant efficiencies and fewer purchases of third-party materials, Graves said.

Reduced capital spending could also be realized in Argentina and Quebec where both companies are developing mining and chemical operations.

Allkem has a market cap of roughly $6.42 billion and Livent $4.58 billion.

Together, they bring 2022 revenue of $1.9 billion, with $1.2 billion in combined 2022 adjusted EBITDA, and combined liquidity, including net cash on hand and undrawn credit lines, of $1.4 billion.

Enhancing scale

Allkem and Livent said in a press release the companies run lithium brine facilities in Argentina that are around 10 km (6.2 miles) away. Both are also developing hard rock lithium mines in Quebec less than 100 km (62 miles) from each other.

Allkem, which also mines hard rock lithium in Australia, has a chemical conversion facility in Japan. The company describes itself as a pioneer in the emerging field of direct lithium extraction, which is “seen as a tantalizing prospect for producing more battery metal faster than traditional mining methods,” the company said.

“This combination places us in the top three of producers with approximately 250,000 tons of LCE [lithium carbonate equivalent] by 2027,” Martín Pérez de Solay, Allkem CEO and managing director, told analysts. However, it’s not just size. The combination will create the most competitive product offering in the market, he added.

Newco’s integrated production profile will include spodumene, carbonate, hydroxide and specialties in key lithium regions.

“Our production and processing facilities in close proximity to our customers will allow us to be flexible and nimble,” he added. “Further, our global industrial processing network is uniquely positioned to integrate into North America and European value chains and meet the demand for more localized supply chains.”

Scale was one of the compelling reasons for the merger, according to Graves.

Being fully vertically integrated with a regionally diverse reach “gives us security of supply, better predictability of cost, added flexibility and a better ability to serve our customers,” Graves said.

“Combining our development plans allows us to both accelerate the delivery of our expansion as well as reduce the risk associated with these large capital projects,” Graves said.

‘Bold move’

Analysts on the call appeared to have positive reactions to the merger.

“Kudos on the bold move,” said Chris Kapsch, an analyst with Loop Capital Markets. “It makes complete sense to me from a strategic standpoint, when you’re thinking about scale, scope and relevance.”

Yet, he wanted to know about the integration strategy, given that EV makers say the bottleneck in the market isn’t necessarily in getting lithium out of the ground, but rather its conversion to a battery-grade chemical.

To that, Graves said there will almost certainly be more hydroxide capabilities with Allkem’s assets in Japan and Livent’s ability to expand in the U.S. However, action will be driven by what customers demand, he said.

Under the terms of the merger agreement, Allkem shareholders will receive one share in the combined entity for each share they own, and the company will eventually own 56% of the new firm. For each existing share of Livent, shareholders will receive 2.406 shares in the new company.

Graves will lead the new, combined firm as CEO, with Allkem's Peter Coleman serving as chairman. The unnamed corporation will be listed on the New York Stock Exchange and headquartered in the U.S.

The transaction is expected to close by year-end 2023, subject to approval from regulators and shareholders, among other customary closing conditions.

Post-close, Livent shareholders will own 44% and Allkem shareholders will own 56% of the combined company. The split, Graves said, reflects each company’s contributions and recent share prices.

Hart Energy Staff contributed to this article.