Liontown Resources Limited (ASX:LTR) has recently announced a revised conditional and non-binding indicative proposal from Albemarle Corporation (“Albemarle”) expressing the intent to acquire all outstanding ordinary shares of Liontown at $3.00 per share in cash through a scheme of arrangement, potentially signalling a notable transformation in the lithium mining industry.
The Revised Indicative Proposal
The Company is currently advancing its Kathleen Valley Project, valued at $895 million, situated near Leinster in the northern Goldfields of Western Australia, with production expected to commence in the upcoming year.
In recent developments, Liontown disclosed that it had rebuffed three approaches from Albemarle over the last five months, including a latest non-binding offer of $3 per share, which marks an increase from previous proposals of $2.50 per share on March 27, $2.35 on March 3, and $2.20 on October 20 in the preceding year.
Albemarle’s Revised Indicative Proposal is subject to various conditions before becoming a binding offer including the satisfactory completion of due diligence by Albemarle, the unanimous recommendation of the proposal by the Liontown Board, and the execution of a mutually acceptable scheme implementation deed.
Additionally, any scheme implementation deed would require approval from Liontown shareholders and regulatory authorities.
Exclusive Due Diligence Period
The Liontown Board has undertaken a thorough evaluation of the Revised Indicative Proposal and decided to grant Albemarle an exclusive window to conduct due diligence.
This exclusivity period, subject to customary fiduciary exceptions, allows Albemarle to formulate a binding proposal should they choose to do so. This binding proposal would, in turn, be subject to both parties agreeing on a mutually acceptable binding scheme implementation agreement.
Liontown’s Board Intention
Crucially, if Albemarle puts forward a binding proposal at $3.00 per share, and all conditions are met, the Liontown Board’s intention is to unanimously recommend that shareholders vote in favour of the proposal.
This endorsement, of course, remains contingent upon the absence of a superior proposal and the ongoing confirmation by an independent expert that the transaction is in the best interests of shareholders.
Albemarle’s Strategic Move
Albemarle’s aggressive bid for Liontown Resources has been met with considerable attention, as the American company seeks to secure critical mineral assets in Australia.
This pursuit aligns with the Australian government’s vision of attracting “like-minded” foreign investors to bolster its critical minerals sector, with Albemarle’s previous success in gaining approval from the Foreign Investment Review Board (FIRB) for its acquisition of a stake in MinRes’ Wodgina Lithium Operation likely paving the way for a smoother approval process for the Liontown acquisition.
The IRA’s Impact
President Biden’s Inflation Reduction Act has further solidified the partnership between Australia and the US in the realm of critical minerals.
The act extends subsidies to battery manufacturers utilising Australian minerals, on par with those using American minerals. This strategic alignment highlights both countries’ commitment to ensuring a secure supply of critical minerals, crucial for decarbonisation and defence application, also providing a framework for mutually beneficial cooperation in this critical sector.
Implications for the Lithium Sector
Albemarle’s bid values Liontown’s lithium assets at approximately $1,900 per tonne, a notable premium compared to the lithium price applied to other ASX lithium companies.
This valuation sheds light on the undervaluation of lithium companies as a whole, potentially signalling a positive outlook for the lithium sector’s long-term prices, with the opportunity to attract further investment and exploration in Australia’s lithium-rich regions.
LTR’s Australian Stock Exchange-listed share price is currently trading at $2.80 (11.00am UTC+ 8 hours).