Rio Tinto-Arcadium Lithium $9.6b merger marks major step in global lithium market expansion

Mining giant Rio Tinto (ASX: RIO) has demonstrated its confidence in the lithium sector by confirming a $9.6 billion merger with Arcadium Lithium (ASX: LTM).

Established in early January this year, Arcadium is one of the world’s leading global lithium platforms.

Rio will acquire Arcadium in an all-cash transaction for approximately $8.68 (US$5.85) per share, a premium of 90% over the takeover target’s closing price on 4 October 2024 and a 39% premium to its volume-weighted average price since listing.

‘Right point in the cycle’

Rio Tinto chief executive officer Jakob Stausholm stated that acquiring Arcadium is a significant step forward in the company’s long-term strategy to create a world-class lithium business alongside its aluminium and copper operations.

“Arcadium Lithium is an outstanding business today and we will bring our scale, development capabilities and financial strength to realise the full potential of its Tier 1 portfolio,” he said.

“This is a counter-cyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle.”

Energy transition leader

In a transaction that was the talk of the markets for days and has already had a direct impact on lithium markets and stocks, Arcadium’s lithium business will merge into Rio Tinto’s portfolio, establishing a global leader in energy transition commodities.

Arcadium’s current annual lithium production capacity, spanning various products including lithium hydroxide and lithium carbonate, is 75,000 tonnes of lithium carbonate equivalent and it has plans to more than double this by the end of 2028.

Its global operations employ 2,400 workers and include facilities and projects in Argentina, Australia, Canada, China, Japan, the United Kingdom and the United States.

Shareholders de-risked

Arcadium Lithium chief executive officer Paul Graves said Rio had made a compelling cash offer that de-risks shareholders’ exposure to market volatility.

“Arcadium Lithium is a leading global lithium producer with the broadest offering of lithium chemical products and a world-class manufacturing network, backed by a comprehensive technology portfolio and expertise in all aspects of the lithium value chain,” he said.

“This agreement with Rio Tinto demonstrates the value in what we have built over many years at Arcadium Lithium and its predecessor companies and we are excited that this transaction will give us the opportunity to accelerate and expand our strategy for the benefit of our customers, our employees and the communities in which we operate.”

Rio Tinto indicated that Arcadium’s projected growth capital expenditure would represent approximately 5% of its group CapEx of up to $15b across 2025 and 2026.

The transaction has been unanimously approved by both boards and is expected to close in mid-2025.