Arcadium Lithium board urged to stay clear of Rio Tinto’s ‘highly opportunistic’ $5.9b bid

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Arcadium Lithium board urged to stay clear of Rio Tinto’s ‘highly opportunistic’ $5.9b bid

Arcadium Lithium has been urged by a shareholder to steer clear of Rio Tinto’s potential $US4 billion ($5.88b) bid for the company, describing the deal as “highly opportunistic”.

Following reports that Rio Tinto was in talks to buy Arcadium for between $US4b to $US6b, Sydney-based Blackwattle Investment Partners said a ***** price should be closer to $US8b and that the dual-listed global lithium miner should be “willing to walk away from an opportunistic offer”.

Portfolio managers Tim Riordan and Michael Teran penned a letter to Arcadium’s Philadelphia-based board noting a sharp drop in Arcadium’s share price as a result of crashing lithium prices.

“(Arcadium’s) share price has fallen 63 per cent this year on weak lithium markets and reached an all-time low last month,” Mr Riordan and Mr Teran said.

“Global lithium markets appear to have bottomed out, with lithium chemical indices stabilising, and in our opinion the timing of this potential ***** could not be at a more value destructive ******* for shareholders.

“Rio Tinto’s potential acquisition of Arcadium is highly opportunistic and, in our opinion, would require a significant premium to realise fair valuation for the business.”

While the pair was “very excited” about the potential takeover, they said it had happen with the right ********** and at the right time.

Mr Riordan and Mr Teran said the reported valuation “significantly undervalues” Paul Graves-led Arcadium and its future growth prospects.

They added the reported acquisition price range was also well below where Arcadium’s share price was trading on the *********** Securities Exchange in January, around $10. Arcadium shares closed up 2.7 per cent to $4.18 on Friday.

“This price range approximates to about 3.1-times to 4.7 times FY28 EBITDA, the ******* when (Arcadium) realises full production post the growth investment phase,” the pair said.

“This compares to through-the-cycle EV/EBITDA multiples of 9-times to 11-times for the industry.”

The potential deal would make Rio Tinto one of the world’s top producers of the battery metal that is a key component in rechargeable batteries in electric vehicles.

Lithium stocks globally have languished this year as a supply glut overwhelmed demand from battery manufacturers amid slower EV sales.

Arcadium owns the Mt Cattlin operation in Ravensthorpe.

Rio Tinto and Arcadium were contacted for comment on Sunday.

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