Allkem in $16b merger with US-based Livent to create global lithium producer

Lithium companies Allkem (ASX: AKE) and US-based Livent have today announced a US$10.6 billion (AUD$15.7 billion) ‘merger of equals’ that will create a global chemicals producer called NewCo.

The deal comes just two years after Allkem, formerly Brisbane-based Orocobre, merged with Argentina-headquartered Galaxy Resources in a bid to capitalise on the boom in the manufacture of electric vehicles (EVs) which rely on the metal for the production of rechargeable batteries.

Under the deal, Allkem shareholders will own the majority of NewCo (56 per cent), while Livent shareholders will hold the remaining 44 per cent in the ‘leading global lithium chemicals producer’ which will be dual listed on the New York Stock Exchange (NYSE) and the Australian Stock Exchange.

Allkem says the merged entity will have pro-forma combined revenue of US$1.9 billion and adjusted earnings of US$1.2 billion based on calendar year 2022 figures, with the combination to “help power the transition to EVs, cleaner energy and a more sustainable future” according to Livent president and CEO Paul Graves who will become the CEO of NewCo.

Headquartered in Philadelphia, US, Livent is a nearly 80-year-old company that produces a diverse range of lithium chemicals for energy storage and other specialty applications.

The company has a workforce of approximately 1,350 full-time, part-time, temporary and contract employees and operates manufacturing sites in the US, England, China and Argentina.

Allkem, which now calls Buenos Aires, Argentina home following the 2021 merger of Orocobre and Galaxy Resources, has a portfolio of lithium chemicals operations including a lithium brine business in Argentina, a hard rock lithium outfit in Australia, a hard rock development project in Québec and a lithium hydroxide conversion facility in Japan.

The two companies believe their geographically adjacent low-cost asset portfolio will create opportunities to accelerate and de-risk the development of a strong pipeline of growth projects expected to deliver a production capacity of approximately 250,000 tonnes per annum by 2027.

With Livent’s technical and commercial capabilities and Allkem’s diverse resource base and growth pipeline, Graves says NewCo will be well-positioned to capitalise on the expected growth in lithium demand from EVs and energy storage solutions.

“I am excited for what lies ahead as Livent and Allkem combine forces to help power the transition to EVs, cleaner energy and a more sustainable future,” Graves says.

“We look forward to playing an even bigger role in the acceleration of decarbonisation policies by providing the lithium needed to enable this critical global energy shift.

“As a combined company, we will have the enhanced scale, product range, geographic coverage, and execution capabilities to meet our customers’ rapidly growing demand for lithium chemicals.”

Allkem CEO Martín Pérez de Solay, who will provide consulting services to NewCo post-merger, says the combination is ‘transformational’ and a ‘significant milestone’ for the company.

“We are bringing together two highly complementary businesses to create a leading global lithium chemicals company, building on Allkem’s demonstrated track record of integration,” Pérez de Solay says.

“The vertically integrated NewCo will improve delivery of high-quality, value-added products to our diverse customer base and unlock material synergies.

“The combination brings together teams with strong expertise in project development, product innovation, and marketing, and sets us up for a faster and de-risked delivery of the next phase of our growth.”

He adds that shareholders should expect significant benefits from the combination as the company transforms into a ‘truly global player with listings in the US and Australia’.

“We will maintain our joint commitment to safety, quality, and productivity and through increased scale we can also improve outcomes for our employees, customers, partners, and the communities in which we operate,” he says.

Once the transaction is complete by the end of 2023, Allkem director Peter Coleman will become the chairman of NewCo, leading a 14-member board consisting of seven directors designated by Livent and seven designated by Allkem.

NewCo’s corporate headquarters will be in North America with an exact location to be announced at a later date, and the firm’s primary listing will be on the NYSE.

The deal is subject to regulatory approvals and other customary conditions including shareholder approval for each company and Australian court approval.