Allkem and Livent: a 10 billion merger
On Wednesday, May 10, Australian company Alkem and U.S. lithium giant Livent Corp announced plans to merge to form a new litihum giant. Investment banks Morgan Stanley and UBS are advising Allkem.
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A $10 billion merger for a new lithium giant
Allkem, a publicly traded company in Australia, and Livent, a U.S. company headquartered in Philadelphia, are set to merge, creating the world's third largest lithium producer.
The future company will be 56% owned by Allkem shareholders and 44% by Livent shareholders. The transaction is valued at $10.6 billion and has sales of $1.9 billion.
In addition, the production of the new group will represent about 7% of world production and will thus overtake the Chilean company SQM and the American company Albemarle in world lithium production.
The transaction is expected to be completed by the end of 2023, and the merged entity will be listed on the New York Stock Exchange and headquartered in the United States.
The strategic motivations of this merger
The purpose of this merger is twofold. On the one hand, it would meet a "rapidly growing demand" for lithium-based chemicals. Indeed, according to the London-based Royal Society of Chemistry, lithium has become an essential component in everything from rechargeable batteries to smartphones to electric vehicles.
On the other hand, both entities want to capitalize on their highly complementary business models to become a global leader in lithium production.
Depuis plus de 80 ans, Livent est à la pointe de l'innovation
Livent established its roots in the lithium market in the 1940s, when it worked closely with the U.S. government to develop practical uses for lithium. In 1991, the company began supplying Sony Electronics with lithium for its first lithium-ion batteries, which were used in pocket camcorders and other devices. This advance made these cameras more compact and portable.
With more than 80 years of experience in producing high quality lithium, Livent is now the partner of choice for leading battery and automotive manufacturers to create breakthrough products. Using patented materials called SLMP® (Stabilized Lithium Metal Powder), the company continues its research to develop advanced, more sustainable technologies. This positions Livent for the next generation of high energy density batteries.
Livent has already announced plans to expand overseas to meet rising demand. In November, it told another media outlet that it was evaluating lithium assets in Canada and other countries to increase its production capacity. In addition, the merger with Alkem is part of a shared desire by both brands to increase their lithium production.
Peter Coleman, the current president of Alkem, was appointed last year to replace Martin Rowley and oversee ambitious growth plans to triple production by 2026.
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Six times more electric cars by 2025
Today, the electric vehicle market is extremely dynamic. For example, some 1.1 million vehicles were sold in 2022, up 28% in one year (despite logistical problems related to the pandemic). But according to Livent boss Paul Graves, six times as many electric cars will be sold by 2025, referring to recent projections by Bloomberg New Energy Finance. According to this study, sales of electric cars will have surpassed those of "conventional" vehicles by 2040. That's why Livent is looking to ramp up production quickly while taking advantage of the strengths that Alkem has.
Currently, China holds a dominant position as a downstream producer of battery materials. However, the only aspect of the lithium supply chain that it does not control is mining, which is important in countries like Australia and Chile. In sum, this Livent-Allkem merger deal has a favorable impact on Washington's efforts to challenge Beijing's supremacy in several key sectors of the energy transition.
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