After seven months, four bids, and one privately held mining player getting involved, Albemarle’s multibillion bid for Australian development-stage lithium miner
Liontown Resources
won’t proceed. It just got too complicated.
As a result,
Albemarle
(ticker: ALB) and Liontown (LTR.Australia) shares are headed in opposite directions early Monday.
Sunday, lithium giant Albemarle announced it withdrew a proposal to acquire Lionton for 3 Australian dollars a share. Albemarle initially disclosed a hostile bid in March, for A$2.50 a share after two other bids had been rejected by Liontown. The A$3 bid got Liontown to the table, but a few days ago, privately held Australian iron-ore miner Hancock Prospecting announced it had amassed a 19.9% stake in Liontown.
Hancock didn’t respond to a request for comment about the plans for its stake.
“Our engagement with the Liontown team has been meaningful and productive. We appreciate the level of cooperation we have received, and we thank the entire team for their efforts,” said Kent Masters, CEO of Albemarle. Complexity was cited as one reason the deal didn’t move forward.
Albemarle stock was up 2.3% in midday trading Monday, while the
S&P 500
and
Dow Jones Industrial Average
were up 1% and 0.9%, respectively. Liontown shares were halted in Australia. Shares closed down 2.8% to A$2.79 apiece on Friday.
Liontown shares were closer to A$1.50 when Albermarle’s bidding came to light. Shares might slide back toward that level. “We cut our target price 70 cents per share to A$2.30 a share and move to Sell on valuation,” wrote Citi analyst Kate McCutcheon in a Sunday report. She doesn’t see Hancock buying the whole company and has some concerns that project timelines will be met.
Liontown has two mining projects under development in Western Australia. Production of lithium products suitable for refinement into battery-grade materials should begin around 2024.
Albemarle was to pay roughly A$6.2 billion, or $4.2 billion, for those projects if the A$3 bid was accepted.
Albemarle investors seem relieved the company ended the Liontown bid. Piper Sandler analyst Charles Neivert wrote Monday in a short report reacting to the news that a positive share price reaction was likely.
Investors might have feared Albemarle was overpaying. In March, when the company disclosed its hostile bid for Liontown, benchmark lithium prices were around $50,000 a metric ton. Now they are closer to $25,000 a metric ton.
Albemarle shares are down about 25% over the same span. Lithium demand is expected to grow in the long term as more electric vehicles are sold around the world. But shares of lithium producers don’t do well in smaller time frames when the commodities see short-term volatility.
Write to Al Root at [email protected]
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