Rio Tinto Acquires Arcadium Lithium in $6.7 Billion Deal

Rio Tinto Plans $6.7 Billion Acquisition of Arcadium Lithium

Rio Tinto announced in a stock exchange filing that it intends to acquire Arcadium Lithium in a deal valued at approximately $6.7 billion. This all-cash transaction is set at a price of $5.85 per share, which represents a 90% premium over Arcadium’s closing share price of $3.08 on October 4, 2024, and a 39% premium compared to the company’s volume-weighted average price since its founding in January of this year.

The acquisition will enhance Rio Tinto’s portfolio of energy transition commodities, which already includes aluminum, copper, and high-grade iron ore. By integrating Arcadium’s lithium operations, Rio Tinto aims to solidify its position as a key supplier of materials essential for renewable energy technologies and electric vehicle batteries.

Arcadium Lithium is a relatively new player in the market but has quickly established a strong foothold in the lithium chemicals sector. The company boasts a vertically integrated lithium supply chain, encompassing hard-rock mining, brine extraction, and an innovative direct lithium extraction process. Currently, Arcadium has an annual production capacity of 75,000 tonnes of lithium carbonate equivalent and aims to more than double this capacity by 2028.

For Rio Tinto, this acquisition is a strategic move to leverage the increasing demand for lithium, fueled by the global transition towards electric vehicles and clean energy. Although spot lithium prices have recently declined, long-term projections indicate robust demand growth for the metal, with a compound annual growth rate of over 10% anticipated through 2040.

Rio Tinto’s CEO, Jakob Stausholm, characterized the acquisition as a "significant step forward" in the company’s long-term strategy. Paul Graves, CEO of Arcadium Lithium, echoed this sentiment, highlighting the value Arcadium has developed over the years and emphasizing the advantages of minimizing shareholder exposure to market fluctuations while advancing the company’s aggressive growth plans.

The timing of this deal is notable for the lithium market, which has experienced price surges in recent years before cooling significantly, with prices falling by over 80% from their previous highs. This counter-cyclical move by Rio Tinto positions the company to capitalize on an expected sustained, long-term increase in lithium demand.

With this acquisition, Rio Tinto also anticipates operational synergies, particularly in regions like Quebec and Argentina, where both companies have established operations. The agreement has received unanimous approval from the boards of both companies and is expected to finalize by mid-2025, pending necessary shareholder and regulatory approvals.

If the acquisition is successfully concluded, Rio Tinto will emerge as one of the largest lithium producers globally, reinforcing its role in the energy transition. Advisors for the deal include Goldman Sachs and J.P. Morgan for Rio Tinto, while Arcadium is advised by UBS and Gordon Dyal & Co.