US battery chemical giant Albemarle Corporation (NYSE:ALB) will not proceed with its $6.6 billion Liontown Resources (ASX:LTR) Ltd takeover bid.
Complications surrounding billionaire Gina Rinehart’s Hancock Prospecting’s $1.3 billion share buying spree has played a key role in the company’s decision to retreat.
Hancock now has a 19.9% stake in the owner of the Kathleen Valley project in Western Australia’s northern Goldfields.
Lithium hopeful Liontown has now turned to UBS to lead a possible capital raising.
Deal scuttled
The NYSE giant cited an inability to work with Hancock in a Hancock proposed partnership arrangement.
Albermarle withdrew its $3 a share offer on Monday morning, with Liontown now in a trading halt.
“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,” Albemarle chief executive Kent Masters said.
“That said, moving forward with the acquisition, at this time, is not in Albemarle’s best interests.”
The pull-out leaves Liontown needing $450 million to complete the Kathleen Valley project.
It will look into debt and equity raisings and, separate to the Albemarle due diligence process, has been in talks with banks and export credit agencies for funding.
“Albemarle has advised Liontown that its decision to withdraw its proposal was due to the growing complexities associated with executing the transaction,” Liontown told the ASX.
“Albemarle has confirmed to Liontown its favourable view of the flagship Kathleen Valley project and Liontown’s management.”
While Hancock Prospecting has achieved its “strategic stake objective”, Liontown shares have taken a hit trading as low as $2.78 on Friday, with analysts predicting steeper falls based on Kathleen Valley delivery risks and the potential decline of takeover interest.
Goldman analysts said Hancock’s 19.9% stake would be a sticking point for any other potential suitors.
The Tim Goyder led Liontown board had backed Albermarle’s takeover.
“We acknowledge Albemarle’s decision,” said Tony Ottaviano, Liontown’s managing director. “They were constructive and respectful throughout the diligence process. Notwithstanding, our position to maintain momentum on our base plan has allowed us to keep line of sight of first production from the Kathleen Valley Project in mid-2024.
“The board remains focused on delivering outstanding performance and value to its stakeholders.”
Goldman Sachs (NYSE:NYSE:GS) downgraded Liontown to a sell rating based on a relative valuation of $1.85 a share.