Rio Tinto is to buy the US company Arcadium Lithium for $6.7bn (£5.1bn), in a huge bet on energy transition despite stalling growth in the electric car market.
The deal would make the Anglo-Australian miner one of the largest producers of the battery-making metal, alongside Albemarle and SQM.
Rio Tinto said it would pay $5.85 a share for Arcadium – an almost 90% premium on top of the US-based lithium miner’s closing price of $3.08 on 3 October, the day before news of a potential deal emerged.
The acquisition would give Rio access to lithium mines, processing facilities and deposits in Argentina, Australia, Canada and the US that are all expected to play a key role in manufacturing batteries for electric vehicles (EVs) and other purposes. It will also hand the world’s second largest miner a customer base that includes the carmakers Tesla, BMW and General Motors.
Rio has taken a bet on the long-term future of the lithium market even as prices for the metal have floundered because of Chinese oversupply and a slowdown in EV sales, resulting in lithium miners emerging as attractive takeover targets.
Car manufacturers around the world have for months complained of stalling growth in EV demand. Japan’s Toyota said last week it would delay the start of EV production in the US until 2026, after previously suggesting it would begin at the end of 2025. Ford and Volvo are also among companies to have delayed their transition to electric.
In the UK, the Society of Motor Manufacturers and Traders (SMMT), a lobby group, has found that registrations of new EVs grew by just 3.7% in September, compared with a year earlier, while registrations for new diesel cars increased by about 17.2%.
Referring to the bid to buy Arcadium, Jakob Stausholm, the chief executive of Rio Tinto, said. “This is a countercyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle.”
Peter Coleman, the chair of Arcadium, said the cash offer would provide shareholders with “certainty and liquidity” and avoid the risks associated with lithium market fluctuations.
Arcadium shares have fallen more than 37% since the start of the year, valuing the company at $4.56bn.
Jason Beddow, the managing director of the Australian fund manager Argo Investments, which owns shares in Rio, said the deal made a lot of sense. “Yes, it’s a big premium but stocks have been sold off a lot,” he said.
