Rio Tinto Ltd (ASX:RIO) (LSE:RIO, ASX:RIO, OTC:RTNTF)has agreed terms to acquire US-listed Arcadium Lithium in an all-cash deal worth US$5.85 per share or US$6.7 billion (£5.1 billion) in total.
Flagged at the weekend when talks were confirmed, Rio said the deal brings into the business a world-class, complementary lithium producer and establishes it as a global leader in energy transition commodities “from aluminium and copper to high-grade iron ore and lithium”.
Arcadium has annual lithium production capacity of 75,000 tonnes of lithium carbonate equivalent, with plans in place to more than double this by the end of 2028.
Rio chief executive Jakob Stausholm said: "Acquiring Arcadium Lithium is a significant step forward in Rio Tinto's long-term strategy, creating a world-class lithium business alongside our leading aluminium and copper operations to supply materials needed for the energy transition.
“This is a counter-cyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle.
Arcadium Lithium chief Paul Graves added: "We are confident that this is a compelling cash offer that reflects a full and fair long-term value for our business and de-risks our shareholders' exposure to the execution of our development portfolio and market volatility.”
The deal is counter-cyclical because lithium prices have crashed over the past twelve months as production has ramped up while expectations for electric vehicle demand have been scaled back dramatically.
Lithium carbonate prices in China, for example, have halved over the past year and are almost 90% lower than two years ago.