A Chinese conglomerate with interests in battery making and lithium production has trumped an earlier takeover bid for Talison Lithium (TLH-T) by New Jersey-based chemical maker Rockwood Holdings (ROC-N).
Windfield Holdings Group, a subsidiary of Chengdu Tianqi Industry Group, is offering $7.15 per share to acquire all of the shares it does not already own in the Perth-based lithium producer in a deal worth about $803 million. The offer is 10% higher than Rockwood’s bid of $6.50 per share or $724 million.
Jonathan Lee of Byron Capital Markets in New York points out that Chengdu Tianqi is considering funding its offer through the China Development Bank, a state-owned Chinese bank, and has raised his target price on Talison from $6.55 per share to $7.15 per share.
“Tianqi is a lithium-chemical converter company that purchases lithium concentrate from Talison and converts/upgrades lithium concentrate to lithium chemicals for downstream products,” Lee pens in a research note. “Tianqi currently buys essentially all of its lithium concentrate from Talison and Tianqi is the sole marketer of Talison’s operations going forward.”
The battery technologies and materials analyst argues that the Chinese conglomerate can and will trump any higher bid from Rockwood “given that Tianqi is too integrated with Talison to risk a takeover by Rockwood given Rockwood’s vertical integration in the lithium sector.”
“With higher bids emerging we believe that strategic implications are overtaking fundamentals and the bids show the importance of Talison to other industrial lithium companies,” Lee concludes.
The takeover offer will have to be approved by Australia’s Foreign Acquisitions and Takeovers Act.
Talison said in a statement that its board will meet to discuss the bid “but is not yet in a position to make a determination as to whether that [Tianqi’s] proposal is a superior proposal.”
News of the rival offer pushed Talison’s shares up 1.4% or $0.095 on a trading volume of 4.2 million shares.
Talison has produced lithium from its Greenbushes operations in Western Australia for more than 25 years. In the three months ended Sept. 30 the pure-play lithium producer reported net profit of A$4.7 million ($4.9 million), a 190% year-on-year increase. Revenues totaled A$28.5 million, a 10% jump over the same quarter last year. Operating costs in the quarter were also maintained at A416.6 million, with operating cost per tonne of lithium concentrate falling to A$202.
Greenbushes has proven and probable reserves of 61.5 million tonnes grading 2.8% lithium oxide.
Dave Kaiser of Canaccord Wealth Management notes that Tianqi is the world's largest hard rock lithium converter and makes a variety of raw materials for the battery industry. The conglomerate owns Sichuan Tianqi Lithium.
At presstime Talison was trading at $7.13 per share within a 52-week range of $2.75-$7.25. The company has about 111 million shares outstanding.
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