Mining giant Rio Tinto to acquire Arcadium Lithium for $6.7 billion

Rio Tinto Limited’s booth on the opening day of the Invest in Africa Mining Indaba in Cape Town, South Africa, Monday, February 6, 2023.

DeWine Senior | Bloomberg | Getty Images

The world’s second largest miner Rio Tinto It said on Wednesday it would acquire U.S. lithium producer Arcadium for $6.7 billion.

Rio Tinto said the deal would be an all-cash transaction of $5.85 per share, a 90% premium to Arcadium’s closing price of $3.08 per share on October 4.

Arcadium Lithium’s market capitalization is currently $4.56 billion, according to LSEG data, and its shares are up 37% so far this week. Rio Tinto’s London-listed shares are down 4.7% so far this week.

News of the deal confirms an announcement earlier this week that the two companies were in talks. If the deal goes through, Rio Tinto will become one of the largest lithium suppliers, behind Albemarle and SQM.

Rio Tinto chief executive Jakob Stausholm said the acquisition was “an important step in Rio Tinto’s long-term strategy to create a world-class lithium business alongside our leading aluminum and copper businesses to supply Materials needed for the energy transition.

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Arcadium Lithium CEO Paul Graves said his company “believes this is a compelling cash offer that reflects the full and fair long-term value of our business and reduces the risk to shareholders of executing on our development portfolio and market risks due to fluctuations.

The move comes as mining companies seek to secure vital mineral resources needed for the global energy transition. Lithium prices have been under pressure due to a supply glut in China. So far this year, the benchmark price for 99.2% lithium carbonate has fallen more than 20% to $10,800 a ton, FactSet data shows.

Graves added that the deal would give the company “the opportunity to accelerate and expand our strategy to benefit our customers, employees and the communities in which we operate.”

In the same industry in May, BHP Group said it would not make a firm takeover bid for Anglo American, which rejected a request to extend takeover talks, causing a major merger to collapse. The proposed acquisition is part of an effort to build a copper mining giant and capitalize on the base metal’s key role in the green energy transition.

—CNBC’s Karen Gilchrist contributed to this article.

Correction: This article has been updated with the correct current market value of Arcadium Lithium at the time of publication.