Rio Tinto Ltd (ASX:RIO) (LSE:RIO, ASX:RIO, OTC:RTNTF) has agreed to acquire Arcadium Lithium in an all-cash deal valued at US$6.7 billion, marking a significant move to strengthen its leadership in energy transition commodities.
The US$6.7 billion ($9.96 billion) all-cash deal for US$5.85 per share represents a premium of 90% to Arcadium’s closing price of US$3.08 per share on October 4, 2024, and a 39% premium to its volume-weighted average price since the company’s formation in January 2024.
“You can’t just go to buy something cheaply. This is a very fair price and it’s a good day for both the shareholders of Rio Tinto and Arcadium,” Rio Tinto CEO Jakob Stausholm said.
“It is an outstanding business today and we will bring our scale, development capabilities and financial strength to realise its full potential.”
Building energy capabilities
This acquisition brings Arcadium’s lithium business into Rio Tinto’s portfolio, enhancing its offerings in energy transition materials, which already include aluminium, copper and iron ore.
Arcadium, a global, vertically integrated lithium chemicals producer, operates long-life, low-cost assets and growth projects across multiple regions, including Australia, Argentina, Canada and the United States. The company’s current annual production capacity is 75,000 tonnes of lithium carbonate equivalent with plans to more than double that by 2028.
Stausholm told The Australian, “More lithium mines will be needed to be constructed. Arcadium brings huge skills to the table particularly in processing capability.
“You can’t just mine – you have to mine and process. The mines are at the lower end of the price curve and are long-life.”
Arcadium CEO Paul Graves added, “This is a compelling offer that reflects full long-term value for our business and reduces risks related to market volatility. We are excited for the opportunity this transaction presents to accelerate our growth strategy.”
The deal positions Rio Tinto as a major player in the growing lithium market, vital for supporting the global energy transition.
Strategic and financial rationale
The acquisition of Arcadium will leverage Rio Tinto’s scale, development expertise and financial resources to fully unlock the potential of Arcadium's portfolio.