Rio Tinto to Acquire Arcadium Lithium in $6.7 Billion All-Cash Deal

Rio Tinto, the world’s second-largest mining company, announced on Wednesday its plans to acquire US lithium producer Arcadium Lithium for $6.7 billion in an all-cash transaction.

This deal, priced at $5.85 per share, represents a substantial 90% premium over Arcadium’s closing price of $3.08 on October 4.

Currently, Arcadium Lithium holds a market value of approximately $4.56 billion, with its shares rallying by 37% this week alone. Following the announcement, Arcadium’s shares rose 30% in pre-market trading on Wednesday, reflecting investor optimism. Meanwhile, Rio Tinto’s shares dipped 0.5% in early trading and have decreased by 5% this week.

The acquisition comes after a week of negotiations and signals Rio Tinto’s commitment to strengthening its lithium portfolio amid the growing demand for electric vehicles (EVs). If completed, this acquisition will position Rio Tinto as one of the largest lithium suppliers globally, trailing only Albemarle and SQM.

Jakob Stausholm, CEO of Rio Tinto, described the deal as a “significant step forward” in the company’s long-term strategy to develop a world-class lithium business alongside its existing aluminium and copper operations. He emphasized the importance of lithium in the energy transition.

“We are committed to lithium,” Stausholm stated.

Paul Graves, CEO of Arcadium Lithium, expressed confidence that the cash offer accurately reflects the long-term value of the company and mitigates shareholder exposure to market volatility and development execution risks. The merger would enhance Arcadium’s ability to expand its strategy, benefiting customers, employees, and communities.

Despite the excitement around the acquisition, the lithium market has faced challenges, particularly due to oversupply in China, which has led to a significant drop in lithium prices—over 20% year-to-date. The benchmark 99.2% lithium carbonate price has fallen to approximately $10,800 per metric ton, according to FactSet data.

Graves noted that Arcadium has established long-term supply agreements with major automakers, including Tesla, BMW, Toyota, and General Motors, ensuring steady demand for its products.

Both companies’ boards have unanimously approved the transaction, which still requires approval from 75% of Arcadium shareholders. Arcadium, formed from the merger of Allkem and Livent last year, has been navigating challenging market conditions, prompting its board to advocate for the deal in light of continued low lithium prices.

In addition to this acquisition, Rio Tinto is pursuing the development of a major lithium mine in Serbia, although public protests have delayed construction efforts. The Arcadium acquisition is expected to close next year, with analysts suggesting it could significantly contribute to Rio Tinto’s earnings in the coming years.

CNBC and Financial Times contributed to this report.