Rio Tinto is to buy the US company Arcadium Lithium for $6.7bn (£5.1bn), in a huge bet on the energy transition despite global headwinds in the electric car market.
The Anglo-Australian metals and mining company said it would pay $5.85 a share for the US-based lithium miner. That represents an almost 90% premium to Arcadium’s closing price of $3.08 a share on 3 October, the day before news of a potential deal emerged.
The acquisition would give Rio access to lithium mines, processing facilities and deposits in Argentina, Australia, Canada and the US to fuel decades of growth, as well as a customer base that includes the carmakers Tesla, BMW and General Motors.
Lithium prices have floundered because of Chinese oversupply and a slowdown in electric vehicle sales, resulting in miners of the metal emerging as attractive takeover targets.
“This is a countercyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle,” Jakob Stausholm, the chief executive of Rio, said.
The deal would make Rio Tinto one of the largest producers of the battery-making metal alongside Albemarle and SQM.
The Arcadium chair, Peter Coleman, said the cash offer would provide shareholders with “certainty and liquidity” and avoid the risks associated with lithium market fluctuations.
Arcadium shares have fallen more than 37% since the start of the year, giving it a value of $4.56bn.
Jason Beddow, the managing director of the Australian fund manager Argo Investments, which owns shares in Rio, said the deal made a lot of sense. “Yes, it’s a big premium but stocks have been sold off a lot,” he said.
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Beddow, who visited the companies’ Canadian operations in recent weeks, said: “They are both close together geographically, they both use Quebec hydropower. Rio has a strong chemicals business in Canada that this will slot into.”
The deal, which has been unanimously approved by the companies’ boards, is expected to be completed in mid-2025.