On Monday, Rio Tinto (NYSE: RIO) and lithium producer Arcadium Lithium (NYSE: ALTM) issued statements confirming that they have engaged in initial discussions regarding a potential acquisition. However, both companies have not disclosed any financial specifics. The talks are in the early stages, and there is no guarantee they will progress or result in a deal.
If the acquisition goes through, Rio Tinto would become one of the world’s largest producers of battery metals.
Arcadium is a vertically integrated lithium chemicals producer formed in January from the merger of Allkem and Livent. The company produces a range of lithium chemical products and is at the industry’s forefront with its lithium extraction processes, including hard rock mining, traditional brine ponds, direct lithium extraction (DLE), and various lithium chemical manufacturing techniques.
In New York’s after-hours trading on Friday, Arcadium’s shares surged over 30%.
Amid the global energy transition, critical minerals like lithium have become key targets for countries and major mining companies.
In recent years, the widespread use of lithium-ion materials in electric vehicles, electronics, and storage systems has spurred a new wave of “lithium resource wars” among countries. This competition involves not only mining companies but also upstream businesses, including automakers like Tesla, Volkswagen, Mercedes-Benz, Nio, and Geely, seeking to secure resources.
However, slowdowns in electric vehicle sales have led to a deceleration in demand growth from battery manufacturers, resulting in an oversupply in the lithium market and continued low lithium stock prices globally. As of last Thursday this year, Arcadium’s U.S. stock price has fallen about 60%, dropping more than competitors such as Albemarle and Pilbara Minerals.
Consequently, a shareholder of Arcadium Lithium has urged the company’s board not to accept the acquisition proposal, citing an inadequate offer. Reports suggest Arcadium is valued between $4 billion and $6 billion.
In a letter sent Saturday, portfolio managers Tim Riordan and Michael Teran from Blackwattle Investment Partners Pty. described the proposal as highly speculative, arguing that selling the company now would be value-destructive for shareholders. They noted that the global lithium market seems to have bottomed out, and a more reasonable price closer to $8 billion would better reflect the company’s fair value, requiring a significant premium to truly capture it.
