Liontown Resources (ASX:LTR) has again rejected an unsolicited, conditional, and non-binding indicative offer via a scheme of arrangement from US-based specialty chemical company Albemarle (NYSE:ALB), its third bid in 5 months.
Under the latest offer, Albemarle has proposed acquiring all of the shares in Perth-based Liontown at $2.50 per share, which values the company at $5.2 billion on an enterprise basis. The target’s share price as of 2pm AWST was $2.57, giving it a market capitalisation of $3.35 billion.
Today (28 March), Liontown unanimously rejected the offer, determining it ‘substantially’ undervalues Liontown and is not in the best interest of shareholders. The latest indicative proposal followed the rejection of earlier non-binding indicative proposals received from Albemarle, being $2.35 per share on 3 March, and $2.20 per share on 20 October 2022.
Albemarle says the current offer is a ‘compelling’ opportunity for Liontown shareholders with a per share consideration representing a ‘substantial’ premium for the target’s shareholders. The proposal offers a 63% premium to the target’s closing share price on 27 March 2023; a 69% premium to the 30-day volume weighted average price (VWAP); a 184% premium to the 52-week low share price; and a 41% premium to the median broker price target.
Albemarle says it is prepared to engage immediately in discussions with Liontown to work toward a mutually acceptable definitive agreement.
Liontown labelled today’s offer as ‘opportunist timing’, which it says coincides with recent softness in companies exposed to the lithium sector and the pre-production status of the Kathleen Valley Lithium Project.
Additionally, Liontown has observed the indicative proposal does not reflect the ‘significant’ de-risking that has occurred at Kathleen Valley in recent months, with mining operations starting in the lead up to the scheduled first production in mid-2024. This includes Liontown’s ‘extensive’ growth optionality at Kathleen Valley including potential early revenue from Direct Shipping Ore (DSO); the recently announced 20% increase in plant throughput rate to 3 million tonnes per annum (tpa); and other expansion opportunities being explored across its portfolio.
Liontown adds the proposal does not reflect the scarcity value of Kathleen Valley, noting there are few other lithium assets of this scale, quality, and mine life this close to production in Australia. The company says the offer also does not reflect the positive near-term outlook for existing or new lithium producers underpinned by a forecast growth in global lithium demand, with a predicted supply deficit expected to deliver ‘stronger’ lithium prices for longer.
Liontown reports the latest proposal fails to acknowledge the ‘significant’ synergies available to Albemarle should the suitor be successful, given its existing operations in Australia.
The indicated proposal is subject to several conditions before it would be binding including Liontown providing exclusive due diligence to the satisfaction of Albemarle; Liontown’s board unanimously recommending the proposal; regulatory approvals including competition approval; and entering into a mutually acceptable scheme implementation deed.
Liontown reports Greenhill and Co. is acting as its financial advisor and Allens as a legal advisor. JP Morgan has been retained as financial advisor and Corrs Chambers Westgarth as a legal advisor to Albemarle.
In Albemarle’s announcement today, it says JP Morgan is prepared to provide it with committed financing to support the acquisition and a binding offer would not be subject to a financing contingency.
Meanwhile, Liontown says it has recently become aware that Albemarle’s subsidiary RT Lithium has been building a stake in Liontown through on-market purchases. Based on the most recent share registry information available, RT Lithium now holds about 2.2% of Liontown’s issued shares.
Goldman Sachs currently holds a 5.08% interest in Liontown. As of yesterday, State Street Corporation became a substantial shareholder and now holds a 5.40% stake in the target. According to a March presentation, Liontown Chairman Tim Goyder holds a 15% significant shareholding in the company.
Albemarle believes this offer provides ‘enhanced’ liquidity and accelerates the realisation of incremental value for Liontown shareholders …
Albemarle believes this offer provides ‘enhanced’ liquidity and accelerates the realisation of incremental value for Liontown shareholders beyond what might otherwise be expected from share price performance over the next few years and without the operating, market, financial, and other risks that could impact the value of Liontown.
The suitor notes that the Liontown board has not meaningfully engaged with Albemarle to facilitate its shareholders receiving the benefits of the proposal. Additionally, it believes this is a ‘compelling’ opportunity for Liontown shareholders and says Liontown’s board should immediately engage with Albemarle to facilitate a binding offer to be put to its shareholders for consideration.
Albemarle also believes the addition of Liontown and its team would advance its strategy to produce a sustainable, ‘high-quality’ supply of battery grade materials to support the clean energy transition.
Currently in Western Australia, Albemarle holds various interests and stakes in spodumene resources and lithium conversion facilities including a 49% interest in Windfield Holdings which wholly owns the equity of Talison Lithium, which in turn owns and operates the Greenbushes lithium mine.
The company also holds a 60% interest in Mineral Resources’ (ASX:MRL) Wodgina Project, which includes an unincorporated joint venture (JV) for the operation of the Kemerton spodumene concentrate plant.
Liontown reports it is continuing to progress several attractive funding options for the remaining capital for the Kathleen Valley Lithium Project.
Liontown Resources is an Australian battery minerals producer focused on the Kathleen Valley Lithium Project, and the Buldania Lithium Project in Western Australia.
The company reports Kathleen Valley will be one of the world’s largest lithium mines supplying about 500,000 tonnes of 6% lithium oxide (Li2O) when it enters production in mid-2024.
Images: Liontown Resources Ltd
