Rio Tinto Group, the world’s second-largest mining company, has announced its agreement to acquire Arcadium Lithium (NYSE: ALTM) in an all-cash deal valued at $6.7 billion. This move marks Rio Tinto’s largest acquisition since 2007 and significantly expands its presence in the lithium market.

The deal offers $5.85 per Arcadium share, representing a 90% premium over Arcadium’s closing price on October 4, prior to Rio Tinto’s initial approach. Following the announcement, Arcadium’s shares surged by 30% as investors drove the price to just under the transaction price.

Rio Tinto CEO Jakob Stausholm described the acquisition as a “counter-cyclical expansion” that aligns with the company’s long-term strategy. The purchase will combine Arcadium’s lithium operations with Rio Tinto’s existing aluminum and copper businesses, strengthening its position in supplying materials crucial for the energy transition.

The acquisition grants Rio Tinto access to lithium mines, processing facilities, and deposits across Argentina, Australia, Canada, and the United States. It also provides entry to a customer base that includes major automakers such as Tesla, BMW, and General Motors.

This strategic move comes at a time when lithium prices have been under pressure due to oversupply from China and cooling electric vehicle demand. However, Rio Tinto sees this as an opportune moment to invest in the sector, anticipating future growth in the battery metals market.

The transaction, which has received unanimous approval from both companies’ boards, is expected to close by mid-2025, subject to Arcadium shareholder approval.

This acquisition positions Rio Tinto among the top lithium producers globally, alongside companies like Albemarle and SQM. It also differentiates Rio Tinto from competitors such as BHP Group in the evolving landscape of battery metals.

While many investors are happy with the premium, there’s a notable group that isn’t. Blackwattle Investment Partners, an investor in Arcadium, this morning issued a response to the offer, stating that it undervalues “high-quality, strategic, Tier 1 assets,” and that it would be voting against the offer. The fund highlights in its commentary that the price paid is a 16% discount to the net present value of a 9.0x enterprise value to EBITDA multiple based on perceived EBITDA for 2028.

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