Global lithium chemicals company Allkem (ASX:AKE) has signed a definitive merger agreement with US chemical manufacturer Livent (NYSE:LTHM) to create a yet-to-be-named (NewCo) global lithium chemicals producer.
The company reports the merged companies have a combined 2022 revenue of US$1.9 billion and adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of about US$1.2 billion. Under this agreement, Allkem shareholders will own about 56% of the new company, while Livent shareholders will own the remaining 44%.
The transaction is expected to close by the end of 2023. Additionally, Allkem says the merger creates an opportunity to accelerate and de-risk the development pipeline of projects in Argentina and Chile, which are expected to produce 250,000 tonnes per annum of lithium carbonate equivalent (LCE) by 2027.
This merger is expected to create run-rate operating synergies of about US$125 million per annum and a one-time capital saving of about US$200 million, while a ‘strong’ combined balance sheet and cash flow generate financial flexibility to deliver accelerated growth plans.
NewCo will be incorporated in the Bailiwick of Jersey, with corporate headquarters in North America. The exact location and company name will be announced later.
Upon completion of the transaction, Allkem’s Peter Coleman will become the Chairman of NewCo, Livent’s Paul Graves will become the CEO, and Gilberto Antoniazzi will become the Chief Financial Officer (CFO). The NewCo board will comprise 14 directors, with half being designated by Allkem and Livent, respectively.
Gordon Dyal & Co is acting as exclusive financial advisor and Davis Polk & Wardell and Allens are acting as legal counsel to Livent. Meanwhile, UBS Securities Australia and Morgan Stanley & Co are acting as financial advisors, and King & Wood Mallesons and Sidley Austin are acting as legal counsel to Allkem.
Commenting on the merger, Allkem Chief Executive Officer (CEO) Martín Pérez de Solay says: “The combination of Allkem and Livent is transformational, with compelling strategic logic, and marks a significant milestone in our efforts to grow the company.
“The combination of Allkem and Livent is transformational”
We are bringing together 2 highly complementary businesses to create a leading global lithium chemicals company, building on Allkem’s demonstrated track record of integration. The vertically integrated NewCo will improve delivery of high-quality, value-added products to our diverse customer base and unlock material synergies.”
Also commenting, Livent President and CEO Paul Graves says: “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.
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 is a Buenos Aires-based specialty lithium chemical company with a diverse portfolio of lithium chemicals. Assets held by the company include lithium brine operations in Argentina, a hard rock lithium operation in Australia, and a lithium hydroxide conversion facility in Japan.
Livent is a Philadelphia-based manufacturer that specialises in producing chemicals for energy storage and battery systems, polymers, grease, aerospace, pharmaceuticals, and industrial sectors.
Images: Allkem Ltd
